Online advertising giant Alphabet (NASDAQ:GOOGL) reported Q4 CY2025 results topping the market’s revenue expectations, with sales up 18% year on year to $113.8 billion. Its non-GAAP profit of $2.82 per share was 7% above analysts’ consensus estimates.
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Alphabet (GOOGL) Q4 CY2025 Highlights:
- Revenue: $113.8 billion vs analyst estimates of $111.4 billion (2.2% beat)
- Operating Profit (GAAP): $35.93 billion vs analyst estimates of $36.93 billion (2.7% miss)
- EPS (GAAP): $2.82 vs analyst estimates of $2.64 (7% beat)
- Google Search Revenue: $0.03 vs analyst estimates of $61.31 billion (2.9% beat)
- Google Cloud Revenue: $0.08 vs analyst estimates of $16.29 billion (8.5% beat)
- YouTube Revenue: $11.38 billion vs analyst estimates of $11.83 billion (3.8% miss)
- Google Services Operating Profit: $0.05 vs analyst estimates of $38.17 billion (5.1% beat)
- Google Cloud Operating Profit: $0.42 vs analyst estimates of $3.74 billion (42.1% beat)
- Operating Margin: 31.6%, in line with the same quarter last year
- Market Capitalization: $4.02 trillion
StockStory’s Take
Alphabet’s fourth quarter was marked by strong revenue growth, with management citing the rapid adoption of AI-powered products and significant momentum in Google Cloud and Search. CEO Sundar Pichai highlighted the launch of Gemini 3 and integration of advanced AI models across products as key factors. The company’s focus on developing its own AI infrastructure and expanding its portfolio of enterprise AI solutions contributed meaningfully to performance. Management also attributed the quarter’s results to increased engagement on consumer services and ongoing success in subscription offerings.
Looking forward, Alphabet’s guidance is driven by ongoing investment in AI, a continued ramp in capital expenditures, and further expansion of AI capabilities across its platforms. Management believes these investments will support growth in both enterprise and consumer products. CFO Anat Ashkenazi noted that higher technical infrastructure spending—especially in data centers and AI hardware—will drive future depreciation and operational costs. Pichai added, “We expect the demand we are seeing across the board…is exceptionally strong,” positioning Alphabet to capture opportunities in AI-driven product development and service delivery.
Key Insights from Management’s Remarks
Management credited the quarter’s results to accelerating AI adoption, a surge in enterprise cloud demand, and new product launches that expanded Alphabet’s reach across consumer and business segments.
- AI infrastructure investment: Alphabet’s focus on in-house AI infrastructure, including proprietary TPUs (Tensor Processing Units) and a recently announced acquisition in data center solutions, enabled efficiency gains and cost reduction in serving AI models. Management stated they reduced Gemini serving unit costs by 78% during 2025 through model optimizations and infrastructure improvements.
- Google Cloud momentum: Cloud revenue growth was driven by a spike in demand for enterprise AI products, with management noting a 400% year-over-year increase in generative AI model usage and a doubling of large customer deal activity. Nearly 75% of Google Cloud customers now use Alphabet’s vertically optimized AI offerings, contributing to a backlog exceeding $240 billion.
- Gemini and Gemini Enterprise traction: The Gemini model has seen rapid adoption, powering new features in Search, the Gemini app, and Google Cloud. Management disclosed that over 8 million paid enterprise seats were sold within four months of launch, and daily Gemini model usage far outpaces previous iterations.
- YouTube’s evolving monetization: While overall YouTube ad revenue growth was below expectations, management highlighted strong growth in subscription revenue and continued investment in new ad formats, including shoppable and interactive ads. The company reported robust engagement with AI creator tools and podcast content, with a 75% year-over-year increase in podcast viewing hours on living room devices.
- Waymo investment and expansion: Alphabet led a significant investment round in Waymo, enabling the autonomous driving unit to surpass 20 million fully autonomous trips and expand into new markets, including Miami and international cities. This reflects the company’s commitment to long-term bets beyond core advertising and cloud businesses.
Drivers of Future Performance
Alphabet’s outlook centers on scaling AI across its platforms, with capital investments and product integration expected to drive both revenue growth and margin pressures.
- AI-driven product expansion: Management expects continued growth from integrating AI into Search, cloud, and consumer applications. The Gemini platform is a core driver, with new capabilities supporting agentic commerce and more advanced multimodal search experiences. These efforts are expected to expand Alphabet’s addressable market and deepen user engagement.
- Cloud and enterprise demand: Strong enterprise adoption of Google Cloud’s AI services is projected to sustain revenue momentum, but management acknowledged ongoing supply constraints for AI compute capacity. Alphabet is planning significant CapEx increases—up to $185 billion—to address these constraints and support future growth.
- Margin headwinds from infrastructure: Higher investments in technical infrastructure, especially data centers and AI hardware, are expected to increase depreciation and operational expenses. While management sees these costs as necessary for long-term growth, they cautioned that margin pressures will likely persist as CapEx ramps.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be watching (1) the pace of AI product adoption and monetization in Search and Gemini, (2) the ability to scale Google Cloud enterprise deals and manage ongoing supply constraints, and (3) whether infrastructure investments can be balanced against margin pressures. Execution on new ad formats and international expansion of Waymo will also be critical signposts for Alphabet’s continued growth.
Alphabet currently trades at $331.92, in line with $334.13 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).
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