Alphabet Q4 2025 Earnings: Inside the $403B Revenue Machine Powering the AI Era
On February 4, 2026, Alphabet Inc. reported fourth quarter and full-year 2025 results that crossed a line no company has ever approached from this trajectory: $402.8 billion in annual revenue, up 15% year-over-year, powered by a search business that refuses to decelerate, a cloud division that just posted 48% growth, and the single largest AI infrastructure commitment in corporate history. This is no longer just a search company. This is a platform company generating $132 billion in net income while simultaneously doubling down on a $175 billion bet that artificial intelligence will reshape every industry it touches.
The Headline Numbers
The Q4 print was clean. Revenue of $113.8 billion beat consensus by $2.5 billion. Earnings per share of $2.82 crushed the Street's $2.63 estimate by 7%. Net income surged 30% year-over-year to $34.5 billion.
For the full year, the numbers tell the story of a company firing on every cylinder:
| Metric | FY2025 | FY2024 | YoY Change |
|---|---|---|---|
| Total Revenue | $402.8B | $350.0B | +15.1% |
| Cost of Revenue | $162.5B | $146.3B | +11.1% |
| Operating Expenses | $111.3B | $91.3B | +21.9% |
| Operating Income | $129.0B | $112.4B | +14.8% |
| Net Income | $132.2B | $100.1B | +32.0% |
The standout line is net income growth of 32%, nearly double the top-line growth rate. That delta came from operating leverage, disciplined cost management outside of strategic AI investments, and a $7.5 billion tailwind from other income. This is a company that earned more than the GDP of Kuwait in a single year.
Revenue Deep Dive: Six Engines, One Machine
Alphabet reports six revenue segments, and we tracked every dollar through double-entry accounting in Beancount. Here is the quarterly breakdown for FY2025:
| Segment | Q1 2025 | Q2 2025 | Q3 2025 | Q4 2025 | FY2025 | FY2024 | YoY |
|---|---|---|---|---|---|---|---|
| Google Search | $50.7B | $54.2B | $56.6B | $63.1B | $224.6B | $198.1B | +13.4% |
| YouTube Ads | $8.9B | $9.8B | $10.3B | $11.4B | $40.4B | $36.1B | +11.8% |
| Google Network | $7.3B | $7.2B | $7.4B | $7.8B | $29.7B | $30.4B | -2.1% |
| Subscriptions | $10.4B | $11.2B | $12.9B | $13.6B | $48.1B | $40.3B | +19.2% |
| Google Cloud | $12.3B | $13.6B | $15.2B | $17.7B | $58.7B | $43.2B | +35.9% |
| Other Bets | $0.5B | $0.4B | $0.3B | $0.4B | $1.5B | $1.6B | -6.7% |
| Hedging / Other | $0.2B | $0.1B | ($0.4B) | ($0.1B) | ($0.2B) | $0.2B | -- |
| Total | $90.2B | $96.4B | $102.3B | $113.8B | $402.8B | $350.0B | +15.1% |
Several things jump out.
Google Search ($224.6B, +13.4%): The death of search has been greatly exaggerated. Despite years of hand-wringing about ChatGPT cannibalizing Google's core business, search revenue accelerated through the year -- Q4's 17% growth was the fastest clip since early 2022. AI Overviews are not displacing searches; they are expanding them. Pichai noted on the call that daily queries per user in AI Mode have doubled since launch, with sessions running 3x longer than traditional searches. Nearly 1 in 6 AI Mode queries now use voice or images, opening entirely new query categories that did not exist a year ago. The company shipped over 250 product launches within AI Mode and AI Overviews in Q4 alone.
Google Cloud ($58.7B, +35.9%): Cloud is now the clear second growth engine. Q4's 48% growth rate accelerated from Q3's 34%, and the annual run rate has crossed $70 billion. More on this below -- Cloud deserves its own section.
YouTube ($40.4B ads + ~$20B subscriptions = $60B+): For the first time, Alphabet disclosed that YouTube's combined revenue -- advertising plus subscriptions -- exceeded $60 billion in 2025. That makes YouTube larger than Netflix by annual revenue. Ad growth of 9% in Q4 was solid if unspectacular, but the subscription business (YouTube Premium, Music, TV, NFL Sunday Ticket) is the faster-growing piece.
Subscriptions, Platforms & Devices ($48.1B, +19.2%): This segment -- which includes Google One, YouTube subscriptions, hardware, and Play Store -- continues to compound. The company now has over 325 million paid subscribers across its properties, up from 300 million last quarter.
Google Network ($29.7B, -2.1%): The structural decline in third-party ad network revenue continues, as it should. This is the lowest-margin, lowest-strategic-value revenue Alphabet generates. Its shrinkage is a feature, not a bug.
Other Bets ($1.5B): Waymo is the story here. The autonomous driving subsidiary completed 15 million rides in 2025 -- more than tripling its prior year -- and surpassed 20 million lifetime trips. It now provides over 400,000 rides per week across five U.S. cities, with Miami added in January 2026. Waymo raised $16 billion in fresh capital at a valuation that has roughly tripled in two years.
The Margin Story
Operating margins tell the story of a company investing aggressively while maintaining profitability:
| Metric | FY2025 | FY2024 | Change |
|---|---|---|---|
| Gross Profit | $240.3B | $203.7B | +18.0% |
| Gross Margin | 59.6% | 58.2% | +1.4pp |
| Operating Income | $129.0B | $112.4B | +14.8% |
| Operating Margin | 32.0% | 32.1% | -0.1pp |
| Net Income | $132.2B | $100.1B | +32.0% |
| Net Margin | 32.8% | 28.6% | +4.2pp |
Gross margin expanded 140 basis points to 59.6%, indicating that the AI compute costs flowing through cost-of-revenue (depreciation on TPUs, energy, data center operations) are being more than offset by revenue growth and model efficiency gains. Depreciation was $21.1 billion in 2025, up 38% year-over-year, and management signaled it will rise "meaningfully" in 2026 as the capex ramp flows through.
Operating margin held flat at 32% despite two significant one-time items: a $3.5 billion European Commission fine recognized in Q3 and a $2.1 billion stock-based compensation charge related to Waymo's funding round in Q4. Strip those out, and normalized operating margin expanded by roughly 150 basis points.
Net margin surged to 32.8% from 28.6%, boosted by $7.5 billion in other income (interest, investment gains) and a lower effective tax rate. When your cash pile generates this kind of income, it becomes a meaningful earnings contributor.
The $175 Billion Question: CapEx and AI Infrastructure
Here is the number that made Wall Street gasp.
For 2026, Alphabet expects capital expenditures of $175 billion to $185 billion. That is roughly double the $91.4 billion spent in 2025, which itself was up 74% from $52.5 billion in 2024. To contextualize: this single company plans to invest more in one year than the entire GDP of Hungary.
CFO Anat Ashkenazi broke down the allocation: "Approximately 60% of our investment went towards machines -- so the servers. And then 40% is what would be referred to as long duration assets, which is data centers and networking equipment."
The market's initial reaction was telling. Shares dropped 7% in after-hours trading within minutes of the guidance. Then Pichai and Ashkenazi started talking, and the stock recovered to positive territory by mid-call. The pattern revealed a market that reflexively fears capex but can be persuaded by evidence.
And the evidence is substantial. Pichai addressed the supply constraint head-on: "I do expect to go through the year in a supply constrained way." This is not a company spending because it has the money. This is a company spending because demand exceeds capacity. When your cloud backlog doubles to $240 billion and your flagship AI product reaches 750 million monthly active users, the bottleneck is infrastructure, not demand.
How does this compare to peers?
| Company | 2026 CapEx Guidance | Primary Focus |
|---|---|---|
| Alphabet | $175-185B | AI compute, Cloud, data centers |
| Amazon | ~$200B (estimated) | AWS, logistics, AI |
| Meta | $135B (estimated) | AI training, data centers |
| Microsoft | ~$120B (estimated) | Azure, OpenAI partnership |
The Gemini efficiency story is the counterweight to the capex shock. Over the course of 2025, Alphabet reduced Gemini serving unit costs by 78%. That is not a typo. A nearly 5x improvement in cost efficiency means each dollar of capex delivers dramatically more inference compute than it did twelve months ago. The latest Gemini 3 Pro model processes three times as many daily tokens on average as its predecessor. The API now handles over 10 billion tokens per minute, up from 7 billion last quarter.
As Pichai put it: "How do you ramp up to meet this extraordinary demand for this moment, get our investments right for the long term, and do it all in a way that we are driving efficiencies and doing it in a world-class way?"
The investment thesis boils down to this: the capex is not a cost center. It is a moat. Every dollar spent on TPU clusters and data centers creates capacity that generates revenue through Cloud, improves ad targeting through AI, and locks in enterprise customers through Gemini. The companies that build the infrastructure layer for the AI era will extract rent from it for decades. Alphabet is betting $175 billion that it will be one of those companies.
Google Cloud: The Inflection Point
If there is a single chart that defines Alphabet's transformation, it is Google Cloud's quarterly revenue trajectory:
| Quarter | Revenue | YoY Growth | Operating Income | Operating Margin |
|---|---|---|---|---|
| Q1 2024 | $9.6B | +28% | $0.9B | 9.4% |
| Q2 2024 | $10.3B | +29% | $1.2B | 11.6% |
| Q3 2024 | $11.4B | +35% | $1.9B | 17.5% |
| Q4 2024 | $12.0B | +31% | $2.2B | 18.4% |
| Q1 2025 | $12.3B | +28% | -- | -- |
| Q2 2025 | $13.6B | +32% | -- | -- |
| Q3 2025 | $15.2B | +34% | -- | -- |
| Q4 2025 | $17.7B | +48% | $5.3B | 30.1% |
That Q4 acceleration to 48% is remarkable for a business at this scale. Cloud's annual run rate is now over $70 billion, and operating margin has expanded from 9.4% in Q1 2024 to 30.1% in Q4 2025 -- a tripling in less than two years. The operating leverage story in Cloud alone justifies the infrastructure investment.
The backlog tells the forward-looking story: $240 billion, up 55% quarter-over-quarter and more than doubled year-over-year. That figure now exceeds AWS's reported backlog of roughly $200 billion. The number of deals over $1 billion in 2025 surpassed the previous three years combined.
Enterprise wins are increasingly high-profile. Airbus, Honeywell, and BNY Mellon are deploying Gemini-powered solutions. Over 120,000 enterprises now use Gemini, with 8 million paid Gemini Enterprise seats sold to 2,800+ companies in just four months since launch. Ninety-five percent of the top 20 SaaS companies -- including Salesforce and Shopify -- run on Google Cloud with Gemini.
Perhaps the most strategically significant announcement: Google Cloud was named Apple's preferred cloud provider for developing next-generation Apple Foundation Models based on Gemini technology. That deal alone signals a shift in the competitive dynamics of the cloud AI market.
Pichai noted that "just over half of our ML compute is expected to go towards the cloud business" in 2026. That means roughly $90 billion in capex will flow toward serving Cloud customers -- an investment scale that fundamentally changes the competitive dynamics against AWS and Azure.
What Wall Street Thinks
The initial reaction was visceral. A 7% after-hours plunge on the capex headline. Then the fundamentals took over.
Within 24 hours, the analyst community rallied behind the results:
- Goldman Sachs (Eric Sheridan) raised his price target from $375 to $400, calling the Cloud acceleration to 48% a standout and noting Alphabet has "climbed a steep wall of worry in the past 12 months around the AI theme."
- JPMorgan (Doug Anmuth) lifted to $395, framing the capex as coming "from a position of strength" rather than defensive necessity.
- RBC Capital Markets (Brad Erickson) called the quarter "very strong as expected," arguing the Gemini app momentum and Cloud revenue spike were "plenty good as proof points which warrant the higher spend."
- Scotiabank raised to $400, noting a "narrative reversal from 'AI loser' to competitive AI leader."
- Needham jumped from $330 to $400, with analyst Laura Martin noting that Alphabet's key risk is not AI competition but rather scaling infrastructure fast enough: power availability, land, and supply chain.
The consensus view is forming: the market is still pricing Alphabet like an advertising company at roughly 20x forward earnings. But the Cloud business alone, growing at 48% with 30% margins and a $240 billion backlog, would command a premium multiple as a standalone entity. The AI infrastructure buildout is not a drag on valuation -- it is the reason the multiple should expand.
Tracking a $403B Company in Plain Text
One way to truly internalize the financial architecture of a $403 billion revenue machine is to model it from the ground up. We built the entire Alphabet FY2022-2025 income statement in Beancount, the open-source double-entry accounting system, using plain-text files that anyone can audit and verify.
Here is what the Q4 2025 revenue recognition looks like in the ledger:
2025-12-31 * "Q4 2025 Revenue" "Google Search & other"
Assets:Current:Accounts-Receivable 63,100,000,000.00 USD
Income:Google-Services:Advertising:Search -63,100,000,000.00 USD
2025-12-31 * "Q4 2025 Revenue" "Google Cloud"
Assets:Current:Accounts-Receivable 17,660,000,000.00 USD
Income:Google-Cloud -17,660,000,000.00 USD
2025-12-31 * "Q4 2025 Revenue" "YouTube ads"
Assets:Current:Accounts-Receivable 11,380,000,000.00 USD
Income:Google-Services:Advertising:YouTube -11,380,000,000.00 USD
Every revenue segment, every cost line, every tax provision -- modeled as double-entry transactions that balance to the penny. Explore the full Alphabet ledger interactively below:
The entire four-year history -- FY2022 through FY2025 -- fits in roughly 600 lines of plain text. Year-end closing entries zero all income and expense accounts into retained earnings, providing a complete audit trail from quarterly press releases to annual financial statements. When the numbers in this analysis cite "$224.6 billion in Search revenue" or "$58.7 billion in Cloud revenue," those figures are pulled directly from the ledger's closing entries, cross-referenced against SEC filings and earnings releases.
The Verdict: Bull vs. Bear
The Bull Case:
- Google Cloud is compounding at 36%+ annually with expanding margins and a $240 billion backlog that provides multi-year revenue visibility
- Search is not just surviving the AI transition -- it is accelerating, with Q4 growth of 17% proving that AI Overviews expand the addressable query space
- $132 billion in net income fully funds the AI investment without leverage or dilution
- Gemini's 750 million monthly active users and 78% cost reduction demonstrate that Alphabet's AI is not just competitive but economically viable at scale
- Waymo has quietly become the world's leading autonomous driving platform, completing 15 million rides and raising $16 billion at a tripling valuation
The Bear Case:
- The $175-185 billion capex guidance is staggering in absolute terms and creates execution risk if AI demand disappoints
- Regulatory headwinds persist -- the $3.5 billion EC fine is a reminder that antitrust action can strike at any quarter
- YouTube ad revenue growth of 9% in Q4 is decelerating from 15%+ earlier in the year, and the segment missed analyst estimates
- Depreciation is already rising 38% annually and will accelerate further, pressuring operating margins through 2026 and beyond
- Competition in cloud AI is intensifying, with AWS and Azure investing at comparable or greater scale
Our Take: Alphabet is the best-positioned megacap for the AI era. It is the only company simultaneously generating $130 billion+ in annual net income, operating the world's largest search engine, running a $70 billion cloud business growing at nearly 50%, deploying consumer AI to 750 million monthly users, and building the world's leading autonomous driving platform. The $175 billion capex plan is not reckless -- it is the logical response to being supply-constrained in the fastest-growing technology market since mobile. The companies that build this infrastructure layer will define the next two decades. Alphabet is building.
