Alphabet projects up to $185 bn capital spending in 2026 to support AI growth

Alphabet has reported growth across advertising, subscriptions, and cloud in the fourth quarter, led by gains at YouTube, as the company accelerated its push to integrate AI across its businesses.

Google's Parent company's annual revenues exceeded $400 billion for the first time.

Alphabet and Google CEO Sundar Pichai said the quarter was important for the company. “It was a tremendous quarter for Alphabet and annual revenues exceeded $400 billion for the first time,” he said. Pichai said the launch of Gemini 3 was a “major milestone” and that the company is seeing strong momentum across products.

Consolidated Alphabet revenues rose 18%, or 17% in constant currency, to $113.8 billion. Google Services revenues increased 14% to $95.9 billion, driven by 17% growth in Google Search and other, 17% growth in subscriptions, platforms and devices, and 9% growth in YouTube advertising.

YouTube continued to be a key contributor to Alphabet’s advertising and media business. Revenue across YouTube ads and subscriptions exceeded $60 billion for the full year 2025. Alphabet also said it now has more than 325 million paid subscriptions across consumer services, led by Google One and YouTube Premium.

In usage, YouTube maintained its position as the top streaming platform in the U.S. living room for nearly three years, according to Nielsen. The company highlighted engagement around major live and cultural events, including sports and music festivals.

Podcast consumption also rose sharply, with viewers watching more than 700 million hours of podcasts on living room devices in October 2025, up 75% from a year earlier.

AI is increasingly shaping the platform for creators and viewers. In December, more than 1 million channels used new AI-powered creation tools each day.

Alphabet’s broader financial performance reflected the same momentum. Operating income rose 16%, with an operating margin of 31.6%, while net income increased 30%. Earnings per share rose 31% to $2.82. Results included a $2.1 billion employee compensation charge related to Waymo.

Google Cloud revenues rose 48% to $17.7 billion, as demand increased for enterprise AI infrastructure and AI solutions.

Google Cloud ended 2025 at an annual revenue run rate of more than $70 billion, with backlog growing 55% quarter over quarter to $240 billion.

According to Pichai, Alphabet’s first-party AI models now process more than 10 billion tokens per minute through direct API use by customers.

The Gemini app has grown to more than 750 million monthly active users, while Gemini Enterprise, launched four months ago, has sold more than 8 million paid seats.

“Search saw more usage than ever before, with AI continuing to drive an expansionary moment,” Pichai said, adding that AI investments and infrastructure are contributing to growth across the business. Alphabet expects capital expenditure in 2026 to be in the range of $175 billion to $185 billion to meet rising demand.

Its rival signals similarly aggressive spending. Last week, Meta projected 2026 capital expenditure of $115 billion to $135 billion, up from $72 billion last year, highlighting the scale of investment across the sector.