The earnings report showed that Alphabet made positive results by surpassing the expected Wall Street’s financial results. However, the investors on Wall Street responded with a complete lack of interest, as they chose to sell their shares.
The stock price of Google’s parent company, Alphabet, dropped to 4.9% during premarket trading on Thursday. It seems like Big Tech companies only consider positive news valuable when they do not need to pay a large amount to obtain it.
Alphabet Posted Strong Numbers
Alphabet achieved 18% growth in its fourth-quarter revenue that reached $113.83 billion, which exceeded analysts’ predictions of $111.43 billion. The company has hit the $400 billion mark for the first time ever. Also, Google Cloud maintained its status as a positive business unit by generating $17.66 billion, which surpassed the $16.18 billion prediction and confirmed its position as Alphabet’s fastest expanding business.
However, YouTube advertising revenue fell short of expectations when it generated $11.38 billion instead of the expected $11.84 billion. This showed the investors that advertisement growth will not always bring revenue so easily.
Alphabet’s AI Spending
The earnings beat did not affect market performance, but Alphabet’s upcoming budget plans caused the most disruption. The company projected that its 2026 capital expenditures would reach between $175 billion and $185 billion, which exceeds the amount it spent during 2025.
The funding will support Google DeepMind through its development of AI infrastructure and its requirements for computing power. The investors considered their estimates and understood that Alphabet would take time to achieve profits, while it constructs its future through establishing costly data centers.
Analysts View
As per the Barclays analysts, the company’s financial results are experiencing negative effects because of its substantial investments in infrastructure, DeepMind, and Waymo, which will continue to decrease profitability through the next year. However, the firm acknowledged that cloud growth remains significant, because enterprise clients increasingly adopt Gemini, and AI usage metrics shows that they need to invest in that technology.
The analysts said,
“Cloud’s growth is astonishing, measured by any metric: revenue, backlog, API tokens inferenced, enterprise adoption of Gemini. These metrics combined with DeepMind’s progress on the model side, starts to justify the 100% increase in capex in ’26. The AI story is getting better while Search is accelerating – that’s the most important take for GOOG”.
On the other hand, Deutsche Bank analysts described Alphabet’s capex plan as “stunning,” adding that aggressive spending will become either visionary or reckless when future technological advancements create new business conditions.
They said,
“With tech in a current state of flux, it’s not clear whether that’s a good or a bad thing”.
Bottom Line
Alphabet’s earnings reaction shows that current market assessments evaluate both performance and investor endurance. The company makes a substantial investment in artificial intelligence technology because it believes that AI will become the leading market force despite facing short-term revenue declines.
The question for investors centers on Alphabet’s growth, which they know to exist, but they need to determine whether they will wait for Google to finish its future-oriented spending. The current market shows two conflicting responses, as it displays both market satisfaction and market apprehension, which needs to be addressed.