Alphabet caps 2025 with revenue milestone, doubles down on AI spending

Google parent Alphabet delivered a “tremendous quarter” as it closed 2025, chief executive Sundar Pichai said, with its fiscal revenue surging past $400 billion for the first time, and the company doubling its capital investment in 2026 to drive its AI advancements.

The company’s capital expenditure (capex) forecast for 2026 jumped to between $175 billion and $185 billion, up from $91.4 billion in 2025, largely to support AI computing, technical infrastructure and cloud expansion.

“We have been supply constrained even as we have been ramping up our capacity. Obviously, CapEx spend this year is an eye towards the future,” Pichai explained during the fourth-quarter earnings call.

“We are investing in AI compute capacity to support frontier model development by Google DeepMind, ongoing efforts to improve the user experience and drive higher advertiser ROI in Google services, significant cloud customer demand, as well as strategic investments in Other Bets,” Pichai noted.

Alphabet’s peers Meta, Microsoft, and Amazon have also sharply increased capital spending to expand server and data centre capacity as AI-driven growth boosts computing demand, despite lingering concerns about a potential AI bubble. Meta expects its capital expenditure to rise by at least 60% in 2026 from $72.22 billion in 2025, while Microsoft has signalled it will continue to invest heavily.

While capital spending is weighing on the bottom line, it is also driving revenue growth. Alphabet’s fourth-quarter revenue rose 18% year on year to $113.8 billion, while net profit for the quarter increased 30% to $34.4 billion.

“The significant increase in our investments in technical infrastructure will continue to put pressure on the P&L in the form of higher depreciation expense and related data centers operations costs such as energy,” noted Anat Ashkenazi, chief financial officer of Alphabet.

For the full financial year, the tech giant reported revenue of $402.8 billion, up 15% year on year, while net profit for FY25 rose 32% to $132.2 billion.

Most of Alphabet’s revenue still comes from Google advertising. In the fourth quarter, ad revenue, including Google Search, YouTube ads and the Google Network, rose 13.5% year on year to $82.3 billion.

The company’s revenue from Google Search, its largest business, increased 17% to $63.1 billion in Q4. Meanwhile, YouTube ad sales climbed 9% to $11.4 billion during the quarter.

AI capabilities

Google’s Gemini 3 launch in 2025 positioned it as the frontrunner in the AI race, primarily due to its full-stack advantage. It used custom TPUs, billions of user touchpoints, and native multimodality without needing plugins.

Pichai noted that the company is seeing significantly higher engagement per user since the launch of Gemini 3.

Four months after launch, Gemini Enterprise has sold over 8 million paid seats, the Gemini app now reaches more than 750 million monthly active users, and its first-party models process over 10 billion tokens per minute via customer APIs, up from 7 billion last quarter, he added.

Rising cloud

Google Cloud continued to see strong customer demand, with revenue rising 48% YoY to $17.7 billion, driven by growth across enterprise AI infrastructure, AI solutions, and core cloud products. Operating income in the cloud division surged to $5.3 billion, growing 153.8% YoY.

Cloud is now on an annual run rate of over $70 billion, Pichai said, adding that backlog grew by 55% quarter over quarter to $240 billion.

Google remains a key player in the cloud computing industry, competing with Amazon Web Services (AWS) and Microsoft.

During the period, Other Bets, encompassing the Waymo driverless taxi service, witnessed a decrease in revenue, to $370 million. The division also incurred a loss of $3.6 billion, including a $2.1 billion Waymo charge. Alphabet funded a significant portion of the $16 billion investment round that Waymo announced recently.

Waymo’s scale reached over 20 million fully autonomous trips and more than 400,000 weekly rides, highlighting Other Bets’ operational growth.

The company is planning to hire in key investment areas such as AI and cloud. As of December 31, 2025, Alphabet’s employee count was 1,90,820 up from 1,83,323.