(goog stock) Alphabet earnings lift revenue past $400B, but stock slips on $185B AI spending plan

Alphabet’s latest results delivered a clear headline: the company crossed $400 billion in annual revenue for the first time and beat expectations for the December quarter. The immediate market response was more complicated. Shares of both GOOG and GOOGL fell on Wednesday, February 4, as investors focused less on the quarter that just ended and more on how expensive the next phase of the AI buildout could become.

As of 6:00 p.m. ET on February 4, GOOG traded near $333.34 and GOOGL near $333.04.

Alphabet stock price today: GOOG and GOOGL snapshot

The move reflects a familiar earnings pattern for mega-cap tech: strong numbers can still lead to a selloff if spending ramps faster than the market expected.

Alphabet earnings: the quarter that beat expectations

For the fourth quarter of 2025, Alphabet posted revenue of about $113.8 billion and earnings per share of $2.82. Net income rose to roughly $34.5 billion, marking another strong profitability quarter even as the company continues to invest heavily in computing infrastructure.

The results reinforced a central theme of Alphabet’s business right now: core advertising remains resilient, while cloud growth is accelerating and increasingly tied to AI workloads.

Google earnings drivers: ads steady, Cloud surges

Two business lines did most of the work in the report:

• Search and advertising: Search and other advertising revenue rose meaningfully year over year, showing that marketers continue to spend even as budgets get scrutinized more closely.

• Cloud: Cloud revenue jumped sharply, with management pointing to rising demand for AI-related services and capacity. The cloud backlog also expanded, signaling that customers are committing to longer-term contracts.

YouTube advertising was also higher, though its growth pace was more measured than Cloud’s surge. Taken together, the mix suggests Alphabet is still leaning on ads for scale while Cloud becomes a bigger contributor to the growth narrative.

The real headline: AI capex jumps to as much as $185B

Alphabet’s 2026 capital spending plan became the focal point for investors. Management outlined capex expectations in the range of $175 billion to $185 billion, far above the level many analysts had been modeling. The spending is aimed at data centers, networking, and custom chips to support internal AI development and growing customer demand through Cloud.

This is the tradeoff investors are now forced to price in:

• Bull case: More infrastructure strengthens Alphabet’s ability to meet AI demand, defend its ecosystem, and win larger Cloud deals.

• Bear case: Spending ramps faster than near-term revenue and margin expansion, delaying the payoff and pressuring free cash flow.

That tension helps explain why a beat on revenue and profit can coincide with a down day for the stock.

Google earnings call focus: margins, capacity, and AI monetization

The most important question after this print is not whether Alphabet is “in AI,” but how efficiently it can convert that position into profits.

Three points are likely to dominate investor attention over the next quarter:

1. Margin trajectory: Whether higher depreciation and operating costs from new infrastructure start to compress margins, or whether product mix offsets it.

2. Cloud profitability and durability: Cloud growth is strong, but investors want evidence that AI demand is sticky and priced sustainably.

3. Search economics under AI features: As more AI answers appear in search experiences, the key issue is whether monetization holds up without weakening user engagement or ad performance.

What to watch next for GOOG and GOOGL

Alphabet’s next earnings report is expected in late April, and between now and then the stock reaction will likely hinge on signals that connect spending to monetization. The market will look for signs that capacity additions are translating into closed deals, higher average contract value, and stable profitability.

If investors gain confidence that the capex surge is matched by accelerating AI revenue and durable margins, the spending plan can read as a moat-building move. If not, the stock may remain sensitive to any hint of cost creep or slower-than-expected AI payoff.

Sources consulted: Alphabet Investor Relations, Financial Times, The Guardian, Forbes