Google's parent company Alphabet has reported impressive fourth-quarter earnings, outperforming Wall Street's expectations, and achieving a record full-year revenue exceeding $400 billion for the first time.
Despite these strong results, shares dipped during after-hours trading as investors considered Alphabet’s ambitious plans for significant increases in AI-related capital spending. In the fourth quarter, Alphabet's revenue climbed by 18% year over year, reaching nearly $114 billion, outperforming analyst forecasts. The company also saw net income increase by 30% to $34.5 billion, with earnings per share rising 31% to $2.82, all figures surpassing expectations.
What drove Alphabet's revenue growth in 2025? For the entire year, Alphabet announced a total revenue of $403 billion and a profit of approximately $132 billion. This growth was largely fueled by advancements in advertising, cloud services, and subscription models. A key highlight is Google Cloud, which achieved an annual run rate of $70 billion, with fourth-quarter revenues approaching $18 billion, reflecting a robust 48% increase compared to the previous year. Furthermore, YouTube revenues crossed $60 billion, combining revenues from both advertising and subscriptions.
Why is AI spending a concern for investors? Investor sentiment shifted focus as Alphabet outlined expectations for capital expenditures ranging from $175 billion to $185 billion for 2026. This projection nearly doubles the $91 billion to $93 billion allocated in 2025, indicating heavy investment in artificial intelligence models and data center infrastructure.
Initially, shares surged by over 4% in after-hours trading, only to reverse to a decline of about 1.2%, settling around $328, following a close of approximately $333 in regular trading hours. This fluctuation reflects the market's mixed response to Alphabet's ambitious future spending plans in AI and technology.