What Management Said
Read the full Q4 2025 transcript ↗A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release, which is distributed and available to the public through our investor relations website, located at abc.xyz/investor. Backlog grew by 55% quarter-over-quarter to $240 billion, representing a wide breadth of customers driven by demand for AI products. Overall, we are seeing our AI investments and infrastructure drive revenue and growth across the board. To meet customer demand and capitalize on the growing opportunities ahead of us, our 2026 CapEx investments are anticipated to be in the range of $175 billion-$185 billion.
Our latest model powers Google Antigravity, our new development platform, where agents can autonomously plan and execute complex software tasks. Our growth in revenue, operating margin, and backlog highlights the strength of our entire portfolio. These AI customers use 1.8 times as many products as those who do not, enabling us to diversify our product portfolio, deepen customer relationships, and accelerate revenue growth. Our product line has multiple monetization levers, spanning infrastructure, platform, and high-margin AI-powered products and services, with 14 product lines, each exceeding $1 billion in annual revenue.
Our 10-year track record in building our own accelerators with expertise in chips, systems, networking, and software translates to leading power and performance efficiency for large-scale inference and training. Our cloud AI accelerators serve the leading frontier AI labs, capital markets firms like Citadel Securities, enterprises like Mercedes-Benz, and governments for high-performance computing applications. In Q4, revenue from products built on our generative AI models grew nearly 400% year-over-year, significantly accelerating from the prior quarter. Gemini is becoming the AI engine for the world's most successful software companies.
What went well
- Consolidated Q4 revenue reached $113.8 billion, up 18% (17% constant currency); full-year 2025 revenue exceeded $400 billion for the first time ($403 billion, up 15%).
- Google Search and other revenue accelerated to 17% growth ($63.1 billion), with broad strength across all major verticals and retail particularly strong.
- Google Cloud revenue accelerated to 48% growth ($17.7 billion); operating income more than doubled to $5.3 billion with margin expanding from 17.5% to 30.1%.
- Cloud backlog grew 55% sequentially and more than doubled YoY to $240 billion; more $1B+ deals signed in 2025 than the previous three years combined.
- Revenue from products built on Google's generative AI models grew nearly 400% YoY, accelerating from the prior quarter; 14 Cloud product lines each exceeding $1B in annual revenue.
- Gemini 3 Pro saw the fastest adoption in Google's history (3x the daily tokens of 2.5 Pro); Gemini serving unit costs were lowered 78% over 2025.
- Over 8 million paid Gemini Enterprise seats sold (launched four months prior); Gemini app surpassed 750 million MAU; 325 million+ consumer paid subscriptions.
- Announced Apple collaboration as preferred cloud provider and to develop next-gen Apple foundation models based on Gemini technology.
- Record operating cash flow of $52.4 billion in Q4 ($164.7 billion full year); net income up 30% to $34.5 billion, EPS up 31% to $2.82.
What went wrong
- A $2.1 billion stock-based compensation charge tied to Waymo's higher valuation (mostly in R&D) reduced operating income and margin, and widened the Other Bets operating loss to $3.6 billion.
- YouTube advertising growth decelerated to 9% ($11.4 billion), hurt by lapping strong 2024 U.S. election spend and slight weakness in some brand verticals.
- Network advertising revenue declined 2% to $7.8 billion.
- R&D expense rose 42% (driven by the Waymo charge and AI talent), and total operating expenses rose 29% to $32.1 billion.
- 2025 depreciation increased nearly $6 billion (38%) to $21.1 billion, with the growth rate expected to accelerate in Q1 2026 and increase meaningfully for the full year.
- Company expects to remain supply-constrained; a further significant CapEx step-up ($175-185 billion in 2026) will pressure the P&L via depreciation and energy costs.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Full-year CapEx | FY2025 (actual) | $91.4 billion actual |
| Full-year CapEx | FY2026 | $175 billion-$185 billion |
| ML compute allocation to Cloud | FY2026 | just over half of ML compute expected toward Cloud |
| Depreciation growth rate | FY2026 | expected to accelerate in Q1 and increase meaningfully for the full year |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Consolidated revenue | +18% (17% cc) | Acceleration in Search and Cloud revenues. |
| Google Search and other revenue | +17% | Growth across all major verticals, largest contribution from retail; AI-driven expansionary moment for Search. |
| YouTube advertising revenue | +9% | Driven by direct response; negatively affected by lapping strong 2024 U.S. election spend and some brand-vertical softness. |
| Network advertising revenue | -2% | Continued network decline. |
| Subscriptions, platforms and devices revenue | +17% | Strong YouTube subscriptions (Music and Premium) and Google One growth from AI-plan demand. |
| Google Cloud revenue | +48% | Strong GCP performance; accelerating enterprise AI products, TPU/GPU deployment, and Gemini 3 demand; core GCP also meaningful. |
| Google Cloud operating income | more than doubled to $5.3 billion (margin 17.5%->30.1%) | Strong revenue growth and expense efficiency, partly offset by higher technical infrastructure and depreciation costs. |
| Google Services operating income | +22% | Strong Search and subscriptions growth; margin 41.9%. |
| Alphabet operating income | +16% | Operating margin 31.6%, negatively impacted by the $2.1 billion Waymo charge. |
| Net income | +30% | Grew to $34.5 billion, aided by $3.2 billion other income from unrealized equity gains. |
| Earnings per share | +31% | Net income growth; EPS $2.82. |
| Other Bets revenue | $370 million (operating loss $3.6 billion) | Loss reflects the $2.1 billion Waymo stock-based compensation charge. |
| Depreciation expense (full year) | +38% (to $21.1 billion) | Significant technical-infrastructure CapEx build-out flowing to the P&L. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Cloud revenue growth rate | +34% (Q3) | +48% | — |
| Cloud backlog | $155 billion (Q3) | $240 billion (+55% sequential, more than doubled YoY) | — |
| Full-year CapEx | $91-93 billion guided | $91.4 billion actual; 2026 guided to $175-185 billion | — |
| Gemini app monthly active users | 650 million (Q3) | over 750 million | — |
| First-party model token throughput | 7 billion tokens per minute (Q3) | over 10 billion tokens per minute | — |
| GenAI-model product revenue growth | more than 200% YoY (Q3) | nearly 400% YoY | — |
| Cloud product lines above $1B annual revenue | 13 (Q3) | 14 | — |
| Paid consumer subscriptions | 300 million+ (Q3) | over 325 million | — |
Q&A Summary
Brian Nowak (Morgan Stanley): Where the most agentic-commerce progress was made in 2025 and where Sundar is most optimistic in 2026, plus the long-term vision for integrating Genie/content-creation tools into YouTube.
Pichai: 2025 laid the foundation (more robust agentic models, with coding progress most felt); developed the Universal Commerce Protocol with founding partners (launched at NRF in January), and 2026 is when consumers will actually use agentic commerce in Gemini and AI Mode. On YouTube: excited by Genie/world models; Imagen, Veo, Lyria, Genie tools flow into products with creators kept at the center.
Eric Sheridan (Goldman Sachs): Pathway to closing demand/capacity gaps given the step-up in 2026 CapEx, and how to keep finding operating efficiencies to fund the investment.
Pichai: Still supply-constrained while ramping; CapEx has an eye to the future with lengthening supply-chain time horizons; how the gap closes this year reflects prior-year investments. Ashkenazi: Efficiency is ongoing, not episodic; own data-center construction, ~50% of code written by (reviewed) coding agents, and agents deployed across finance/treasury free up capital to reinvest.
Doug Anmuth (JPMorgan): How Google maintains Gemini's position via data/distribution/product integration amid LLM leapfrogging, and potential for TPUs to move into external data centers as an incremental revenue stream.
Pichai: Confident in maintaining momentum through relentless innovation across pre-training, post-training, test-time compute, multimodal, and agentic/coding; a lot of headroom. On TPUs: think of it as part of Google Cloud's wide accelerator choice that meets customer needs and supports strong Cloud momentum.
Mark Mahaney (Evercore ISI): Why YouTube ad growth was only 9% given strong DR and retail, and a rebuttal to the market view that AI undermines the economics of SaaS customers.
Schindler: Full-year YouTube revenue surpassed $60 billion across ads and subs; Q4 ads driven by direct response, with lapping U.S. election spend the largest negative and slight softness in some brand verticals; excited about brand, CTV, Shoppable Mastheads, and Demand Gen. Pichai: Leading SaaS companies are embedding Gemini deeply into critical workflows to drive growth and efficiency; token usage grew robustly in Q4.
Mark Shmulik (AllianceBernstein): Relationship between investment levels and core performance (is there an operating income/FCF target?), and what keeps each executive up at night.
Ashkenazi: A rigorous framework sets the total investment envelope (e.g., $91B CapEx in 2025) and allocates across the organization based on expected near- and long-term return, while maintaining a healthy balance sheet and cash flow. Pichai: The top concern is compute capacity constraints (power, land, supply chain) and ramping to meet extraordinary demand while getting long-term investments right efficiently.
Michael Nathanson (MoffettNathanson): Rationale and opportunity for the Universal Commerce Protocol and its effect on the discovery funnel, and CapEx split between long-duration and short-cycle assets.
Pichai: UCP makes it easier for users to complete transactions while letting merchants showcase offerings/promotions; foundational and now being implemented into Gemini/AI Mode, creating an expansionary commerce moment. Ashkenazi: ~60% of 2025 CapEx went to servers (machines), 40% to data centers/networking (long-duration, depreciating over 40+ years for buildings); just over half of 2026 ML compute expected toward Cloud.
Ross Sandler (Barclays): Usage and retention of the native Gemini app (750M MAU, +100M in Q4) and whether 750M is the right progress metric vs. ChatGPT.
Pichai: Extraordinary Q4 growth in both MAU and engagement per user; active usage, intensity, and retention all improved across iOS, web, and Android globally, helped by Nano Banana and Gemini model progress; many users also get AI-native experiences in AI Mode/Search; momentum continuing.
Ken Gawrelski (Wells Fargo): Evolving views on monetizing conversational/longer-session AI search (and role of premium subscriptions), and aligning for success with partners like Apple/Siri beyond the old revenue-share model.
Schindler: Search acceleration came from many parts working together (retail, finance, health drove the greatest contribution, nearly every vertical accelerated); Gemini-based ads improvements help monetize longer/complex queries; AI Max used by hundreds of thousands of advertisers; strength with SMBs and creative-asset generation.
Justin Post (Bank of America): Any cannibalization of Search from rising Gemini-app usage, and where Gemini-app monetization stands with agentic/other ads potentially incremental.
Pichai: No evidence of cannibalization; giving users choice across Search, AI Overviews, AI Mode, and Gemini creates an expansionary moment that grows overall query types. Schindler: Gemini app currently focused on free tier and subscriptions; ads have always been part of scaling to billions and can be valuable if done well, but they are not rushing and will share plans at the right moment.
More on Alphabet Inc.
Reported 2026-02-04 · figures from the Alphabet Inc. Q4 2025 earnings call.
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