Alphabet beats expectations, forecasts major AI spending increase
Alphabet reported Q4 2025 revenue of $113.8B, up 18% year-on-year, pushing annual revenue past $400B for the first time. Google Cloud revenue grew 48% to $17.7B, while the core Google Services business posted $95.9B in revenue, up 14%. Net income rose 30% to $34.46B.
The numbers beat expectations. The real story is what comes next.
Alphabet announced it will significantly increase capital expenditure in 2026, well above Wall Street forecasts. The company is betting big on AI infrastructure, data centres, and compute capacity. CEO Sundar Pichai pointed to Gemini 3 adoption outpacing any previous model launch, with Gemini reaching 750 million monthly active users.
For APAC enterprise leaders, this matters on three levels. First, the Cloud growth rate (48%) shows enterprises are committing serious budgets to hyperscaler platforms. Second, Alphabet's spending surge will intensify competition for data centre capacity, power infrastructure, and AI talent across the region. Third, the gap between those who can afford this level of AI investment and those who cannot is widening rapidly.
Despite the beat, Alphabet shares dropped 1% after hours. Investors remain nervous about the return timeline on massive AI spending. Sound familiar? Last week Apple posted blowout results and initially fell 2%, before recovering 9% in the following days. The market is having trouble pricing AI infrastructure investments.
Notably, Google's advertising revenue hit $82B for the quarter, the highest ever. The core business is funding the AI transition, but the question remains: how long before AI delivers returns that justify the spending? We will see.
What this means in practice: if you are planning cloud migrations or AI implementations in APAC, expect pricing pressure and capacity constraints as hyperscalers prioritize their own infrastructure buildouts. The companies getting AI compute access in 2026 are the ones with strategic relationships and committed spending already locked in.