Alphabet reported a solid fourth quarter, with revenue rising 18% year on year and earnings surpassing market expectations, underpinned by resilient performance across its core businesses.
Google’s advertising segment continued to show strength, with advertising revenue up 14% year on year. Google Cloud was the standout performer, posting revenue growth of 48% to USD 17.7 billion and delivering operating income of USD 5.3 billion—more than double the figure recorded in the same period last year.
Commenting on the results, Zavier Wong, Market Analyst at eToro, said that while Alphabet’s headline numbers were encouraging, investor attention has shifted toward the scale and execution risk of the company’s capital expenditure plans.
During the quarter alone, Alphabet spent USD 91.5 billion and has guided for capital expenditures of USD 175–185 billion in 2026—well above market expectations. From a shareholder perspective, this level of spending materially reduces free cash flow in the near term, with returns on AI investments yet to be proven at scale.
Alphabet is effectively asking investors to be patient and trust that artificial intelligence will evolve into a significant revenue driver. While the company has little choice but to invest heavily to remain competitive with rivals such as Microsoft, Amazon, and OpenAI, the timeline for meaningful AI monetisation remains uncertain.
AI adoption is clearly accelerating, with Alphabet’s Gemini platform surpassing 750 million monthly users. However, the gap between usage and monetisation remains wide, and prolonged delays in converting AI engagement into revenue could weigh on margins and earnings.
Wong added that although AI spending has so far been viewed as necessary and largely justified, Alphabet’s latest guidance represents a material escalation. “This marks one of the most significant risks we’ve seen so far in the current AI investment cycle,” he noted.
