Alphabet Inc Earnings - Q4 2025 Analysis & Highlights
Alphabet Inc. reported a strong Q4 2025 with record revenues and accelerated growth in Search and Cloud, driven by significant AI investments and strategic partnerships.
Key Financial Results
Alphabet consolidated revenues for Q4 2025 reached $113.8 billion, up 18% (or 17% in constant currency).
Alphabet annual revenues exceeded $400 billion for the first time in 2025.
Operating income increased 16% to $35.9 billion.
Operating margin was 31.6%.
Net income increased 30% to $34.5 billion.
Earnings per share increased 31% to $2.82.
Record operating cash flow of $52.4 billion in Q4 and $164.7 billion for the full year.
Free cash flow of $24.6 billion in Q4 and $73.3 billion for the full year.
Total cost of revenue was $45.8 billion, up 13%.
Traffic Acquisition Costs (TAC) were $16.6 billion, up 12%.
Other costs of revenues were $29.2 billion, up 13%, primarily due to depreciation, content acquisition costs for YouTube, and technical infrastructure operations costs.
Total operating expenses were up 29% to $32.1 billion.
R&D expense increased by 42% due to compensation and depreciation, including a Waymo charge and AI talent investment.
Sales and marketing expenses were up 12%, driven by marketing investments for the Gemini App and Search.
G&A expenses increased 21%, primarily due to a shift in timing of charitable contributions.
Business Segment Results
Google Services
Revenues increased 14% to $95.9 billion, reflecting strong growth in Search and Subscriptions.
Google Search and other advertising revenues increased by 17% to $63.1 billion, with the largest contribution from retail.
YouTube advertising revenues increased 9% to $11.4 billion, driven by direct response advertising.
Network advertising revenues were $7.8 billion, down 2%.
Subscription, platforms and devices revenues increased 17% to $13.6 billion, due to strong growth in YouTube subscriptions (YouTube Music and Premium) and Google One.
Operating income increased 22% to $40.1 billion, and operating margin was 41.9%.
Google Cloud
Revenue accelerated meaningfully, up 48% to $17.7 billion.
Revenues were driven by strong performance in GCP, which grew at a rate much higher than Cloud's overall revenue growth rate.
GCP's performance was driven by accelerating growth in enterprise AI products, generating billions in quarterly revenues.
Strong growth in enterprise AI infrastructure (deployment of TPUs and GPUs) and enterprise AI solutions (demand for Gemini 3).
Core GCP was a meaningful contributor due to strong demand for infrastructure and other services like cybersecurity and data analytics.
Double-digit growth in Workspace, driven by an increase in average revenue per seat and number of seats.
Operating income was $5.3 billion, more than doubling year-over-year.
Operating margin increased from 17.5% to 30.1%.
Backlog increased 55% sequentially and more than doubled year-over-year, reaching $240 billion.
Other Bets
Revenues were $370 million.
Operating loss was $3.6 billion, reflecting a $2.1 billion Waymo charge.
Capital Allocation
Cash and marketable securities of $126.8 billion.
Long-term debt of $46.5 billion.
Capital expenditures (CapEx) were $27.9 billion for Q4 and $91.4 billion for the full year.
60% of CapEx invested in servers and 40% in data centers and networking equipment.
Returned capital to shareholders through $5.5 billion of share repurchases and $2.5 billion of dividend payments.
Industry Trends and Dynamics
AI investments and infrastructure are driving revenue and growth across the board.
AI is transforming the YouTube experience for both creators and viewers.
AI gives businesses the ability to reach more customers in more places than ever before.
LLM frontier is showing exciting progress, with continuous improvements in pre-training, post-training, test time compute, multimodal models, and agentic capabilities.
Competitive Landscape
Google Cloud offers the industry's widest variety of compute options, including NVIDIA GPUs and Google's own TPUs.
Google is collaborating with Apple as their preferred cloud provider and to develop the next generation of Apple Foundation Models based on Gemini technology.
YouTube continues to be the number one streamer in the US for nearly three years, according to Nielsen.
Gemini is becoming the AI engine for the world's most successful software companies.
Growth Opportunities and Strategies
Gemini 3 launch was a major milestone, driving great momentum.
Cloud backlog grew by 55% quarter-over-quarter to $240 billion, driven by demand for AI products.
Over 325 million paid subscriptions across consumer services with strong adoption for Google One and YouTube Premium.
Sold more than 8 million paid seats of Gemini Enterprise since its launch four months ago.
Gemini App now has over 750 million monthly active users, with significantly higher engagement per user since the launch of Gemini 3.
Search saw more usage in Q4 than ever before as AI continues to drive an expansionary moment.
Google Cloud is winning more new customers faster, signing larger customer commitments, and deepening relationships with existing customers.
Nearly 75% of Google Cloud customers have used their vertically optimized AI.
AI customers use 1.8 times as many products as those who do not, enabling diversification of the product portfolio, deeper customer relationships, and accelerated revenue growth.
Google Cloud has 14 product lines, each exceeding $1 billion in annual revenue.
Revenue from products built on generative AI models grew nearly 400% year-over-year in Q4.
More than 120,000 enterprises use Gemini, including AI unicorns and global enterprises.
95% of the top 20 and over 80% of the top 100 SaaS companies use Gemini.
Gemini Enterprise managed over 5 billion customer interactions in Q4, growing 65% year-over-year.
Revenue from AI solutions built by partners increased nearly 300% year-over-year.
Waymo surpassed 20 million fully autonomous trips and is providing more than 400 thousand rides every week.
Waymo is expanding its service territory to Miami and soon to multiple cities across the US, UK, and Japan.
AI is being used to drive significant improvements across all areas of marketing, expanding the playing field for advertisers.
Gemini is being deployed to improve query understanding, driving better query matching, ranking, and quality for Search ads.
Gemini models have a significant impact on query understanding in non-English languages, expanding global opportunities for businesses.
Building more agentic actions into advertiser tools, allowing businesses to leverage Gemini in conversational experiences to identify and run recommended actions.
Advertisers used Gemini to create nearly 70 million creative assets in Q4.
Experimenting with AI Mode monetization, including testing ads below the AI response and direct offers.
Introducing a new open standard for agentic commerce, the Universal Commerce Protocol.
YouTube is focused on becoming a premier shopping destination with innovations like shoppable ad formats.
Creator Partnership Hub makes it easier for brands to find creators and develop campaigns.
Financial Guidance and Outlook
CapEx investments for 2026 are anticipated to be in the range of $175 billion to $185 billion, with investments ramping over the course of the year.
Investments are for AI compute capacity (Google DeepMind), improving user experience and advertiser ROI (Google Services), cloud customer demand, and Other Bets.
FX tailwind expected for consolidated revenues in Q1 at current spot rates, but volatility could affect impact.
Google Services growth expected to be driven by innovation and improved ROI for advertisers, considering seasonal patterns.
Google Cloud expects continued strong growth due to significant demand, despite a tight supply environment.
Depreciation expense and related data center operations costs (e.g., energy) will continue to put pressure on the P&L.
Depreciation increased by nearly $6 billion or 38% from $15.3 billion in 2024 to $21.1 billion in 2025.
Growth rate in 2026 depreciation is expected to accelerate in Q1 and meaningfully increase for the full year.
Planning to continue hiring in key investment areas such as AI and Cloud.
Approximately 60% of CapEx in 2025 went towards servers, and 40% towards data centers and networking equipment, with similar allocation expected for 2026.
Just over half of ML compute is expected to go towards the Cloud business in 2026.
AI Progress
Unrivaled infrastructure serves as the bedrock of the AI stack, with the industry's widest variety of compute options (NVIDIA GPUs and Google's own TPUs).
Intent to acquire Intersect (data center and energy infrastructure solutions) announced in December.
Gemini serving unit costs lowered by 78% over 2025 through model optimizations, efficiency, and utilization improvements.
Offers the most extensive model portfolio in the world, leading across text, vision, and image to video LMArena leaderboards.
Gemini-3 Pro drives state-of-the-art in reasoning and multi-modal understanding, with the fastest adoption of any model in history.
Gemini 3 Pro has consistently processed three times as many daily tokens on average as 2.5 Pro since launch.
Latest model powers Google Antigravity, a new development platform for autonomous planning and execution of complex software tasks.
Google Antigravity has over 1.5 million weekly active users after launching just over two months ago.
First-party models like Gemini now process over 10 billion tokens per minute via direct API used by customers, up from 7 billion last quarter.
Shipping innovation at scale to bring helpful AI features to people everywhere.
Launched personal intelligence in AI Mode in Search and the Gemini App, introduced new features to Gmail and updated Veo, reimagined Chrome as an AI-first agentic browser, and announced Project Genie.
Project Genie lets users create and explore interactive worlds generated in real time using Genie 3.
Laying groundwork for shopping in the AI era by introducing a new open standard for agentic commerce, the Universal Commerce Protocol.
Bringing AI capabilities to Android and Pixel devices.
Pixel 10A will be introduced soon to the Pixel 10 series.
Shipped over 250 product launches within AI Mode and AI Overviews last quarter.
Gemini 3 integrated directly into AI Mode in Search, allowing better query understanding, deeper web exploration, and interactive UI experiences.
AI Overviews upgraded to Gemini 3, providing best-in-class AI responses at the top of search results.
Daily AI Mode queries per user doubled in the US since launch.
Queries in AI Mode are three times longer than traditional searches, with sessions becoming more conversational.
Nearly one in six AI Mode queries are now non-text (voice or images).
Circle to Search is available on over 580 million Android devices.
