By Carmen Arroyo and Annie Bang, Bloomberg
Alphabet Inc. topped projections for quarterly revenue and outlined an ambitious capital spending plan, far surpassing predictions, leveraging its growth to build out the data centers and infrastructure needed to lead in the AI age.
Google’s parent company said capital expenditures will reach as much as $185 billion this year, compared with the $119.5 billion analysts expected. Fourth-quarter sales, excluding partner payouts, were $97.23 billion, surpassing the $95.2 billion average estimate, according to data compiled by Bloomberg.
Expected spending for 2026 will total more than what the internet search giant spent in the three prior years combined. But Chief Executive Officer Sundar Pichai reassured investors that the costs are necessary. “We’re seeing our AI investments and infrastructure drive revenue and growth across the board,” he said Wednesday in a statement. “Search saw more usage than ever before, with AI continuing to drive an expansionary moment.”
Alphabet shares dropped 7% to $309.32 at 9:34 a.m. in New York, the biggest intraday decline since May. The stock has gained about 64% in the last 12 months.
Google Cloud revenue in the recent period jumped 48% to $17.7 billion, beating the $16.2 billion analysts expected, and Gemini, its artificial intelligence model, is rapidly reaching new users, Alphabet said.
Google has raced to reinvent its business for the AI age, working to keep consumers in the habit of going to its search page even when they could also go to chatbots from rivals like OpenAI. The company has quickly improved its Gemini model and integrated it across products — an effort that has required massive investment in data centers and chips for model improvement and cloud customers.
The company has said its massive investments in AI — funding new infrastructure, research and talent — are essential for competing against rivals including Amazon.com Inc., Microsoft Corp. and OpenAI.
About 40% of the company’s technical infrastructure investments were tied to data centers and networking equipment, while 60% were tied to servers, said Anat Ashkenazi, Google’s chief financial officer, on a conference call to discuss earnings. Pichai acknowledged that the company would have to plan for constraints on what would be possible, including those of power and supply chains.
To justify its heavy spending, Alphabet continued to demonstrate momentum in its cloud and search advertising businesses. The company has been incorporating Gemini 3, its latest model, in all its products, including its Chrome browser. The Gemini app also saw 750 million active users through December, compared with 650 million in the three-month period ending in September. Backlog for the cloud business — or revenue under contract but not yet booked — more than doubled year over year, reaching $240 billion, Pichai said on the call.
“The increase in backlog was driven by strong demand for our cloud products, led by our enterprise AI offerings from multiple customers,” Pichai added. Gemini Enterprise has more than 8 million paid users, after launching four months ago.
The industry has also leaned on Google’s progress. Alphabet is supplying up to one million of its specialized AI chips to Anthropic, cementing Google’s position as a key infrastructure provider in the AI space. Gemini will also be a provider of AI for Siri on Apple Inc.’s iPhones. Alphabet’s Ashkenazi also said AI agents are already writing about 50% of Google’s own code.
Alphabet’s Other Bets, which includes self-driving car company Waymo and other ventures, reported $370 million in fourth-quarter revenue, down from last year, while posting an operating loss of $3.6 billion. That compared with analysts’ projection for a loss of $1.3 billion.
The company said it contributed a significant portion of Waymo’s recent $16 billion funding round that valued the company at $126 billion. Alphabet also said its research and development expenses went up by 42%, driven by compensation for AI talent and supporting Waymo.
YouTube, Google’s video-streaming platform, also showed momentum, with Shorts, the video format that competes with Instagram Reels and TikTok, averaging 200 billion daily views, the company said. Revenue from YouTube ads and subscriptions topped $60 billion in 2025.
–With assistance from Phil Kuntz.
(Adds share movement in fourth paragraph)
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