Alphabet beats Q4 revenue but shocks markets with massive 2026 capex outlook – investingLive

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Alphabet beat revenue expectations on Search, Ads and Cloud strength, but massive capex plans for 2026 overshadowed a modest operating income miss.
Summary:
Revenue beat expectations, driven by Search, Ads and Cloud strength
Advertising broadly solid, though YouTube Ads slightly missed
Cloud revenue comfortably exceeded estimates, reinforcing growth narrative
Operating income missed marginally as costs and investment stayed elevated
Capex surged sharply, with a massive step-up flagged for 2026
Alphabet delivered a solid top-line performance in the December quarter, beating revenue expectations as core Search, advertising and Cloud businesses continued to grow. Total revenue rose to $113.83bn, ahead of consensus, while revenue excluding traffic acquisition costs also came in stronger than forecast.
Google Services revenue exceeded expectations, with advertising revenues beating estimates overall. Search and Other revenue showed particular strength, highlighting the resilience of Alphabet’s core cash-generating engine despite a more competitive digital ad landscape. YouTube Ads, however, fell slightly short of forecasts, pointing to more selective advertiser spending in video formats.
Google Cloud was a standout, with revenue rising to $17.66bn, comfortably above expectations. The result reinforces investor confidence in Cloud as a long-term growth driver and an increasingly material contributor to group revenues, supported by continued enterprise demand and AI-related workloads.
On profitability, operating income narrowly missed expectations, reflecting higher costs tied to infrastructure build-out and ongoing AI investment. That pressure was underscored by an exceptionally large capital expenditure print of $91.45bn for 2025 (Q4 Capex was $27.85bn alone), far above market expectations.
Looking ahead, Alphabet flagged an even more aggressive investment stance, guiding 2026 capex at $175bn–$185bn, well above consensus forecasts. The guidance signals a clear commitment to scaling AI infrastructure, data centres and Cloud capacity, but is likely to sharpen market focus on near-term margin discipline versus long-term strategic positioning.
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