Alphabet Beats Expectations as AI Spending Risks Take Center Stage

Editor’s note: Alphabet has reported a strong fourth quarter, beating market expectations on both revenue and earnings, driven by continued resilience in advertising and a sharp acceleration in Google Cloud profitability. While headline growth remains solid, the results have refocused investor attention on the scale of Alphabet’s capital expenditure, particularly its aggressive push into artificial intelligence. With AI adoption expanding rapidly across platforms like Gemini, the key question is no longer demand, but whether and when that usage can be translated into sustainable revenue and returns for shareholders.

Key points

• Alphabet’s Q4 revenue rose 18% year on year, with earnings exceeding expectations.
• Google Cloud revenue jumped 48% to USD 17.7 billion, with operating income more than doubling.
• Advertising revenue remained resilient, growing 14% year on year.
• Capital expenditure reached USD 91.5 billion in the quarter, with 2026 guidance set at USD 175–185 billion.
• Gemini has surpassed 750 million monthly users, highlighting rapid AI adoption.

Why this matters

Alphabet’s results underline a broader shift across Big Tech, where profitability in core businesses is increasingly funding massive AI investment cycles. For investors, the tension lies between long-term strategic positioning and near-term pressure on free cash flow and margins. For the wider digital economy, Alphabet’s spending signals how central AI infrastructure has become to future competitiveness, influencing cloud markets, enterprise adoption, and the pace at which AI moves from experimentation to monetised products.

What to watch next

• How Alphabet manages capital expenditure discipline relative to revenue growth.
• Signals around AI monetisation beyond user growth metrics.
• Cloud margin trends as investment intensity remains elevated.

Disclosure: The content below is a press release provided by the company/PR representative. It is published for informational purposes.

Abu Dhabi, United Arab Emirates – February 05, 2026: Alphabet (NASDAQ: GOOG) 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.

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