Alphabet Beats Q4 but $185B Capex Plan Sinks Stock
Google parent posts $113.8B revenue and $2.82 EPS, topping estimates. But 2026 capex guidance of $175-185B—double last year—sends shares down 5%.
Alphabet beat on every line that matters. The stock dropped anyway.
Google's parent company reported Q4 revenue of $113.8 billion, up 18% year-over-year and about $2.4 billion ahead of consensus. Earnings per share came in at $2.82 versus the $2.63 Wall Street expected. Google Cloud revenue spiked 48% to $17.7 billion, blowing past the $16.2 billion estimate. Advertising revenue rose 13.5% to $82.3 billion.
And yet shares fell roughly 5% in premarket trading Thursday. The culprit: a capex number that made even the bulls pause.
The $185 Billion Question
Alphabet told investors it expects 2026 capital expenditures between $175 billion and $185 billion. The midpoint of $180 billion is more than 50% above what analysts had modeled—Bloomberg's tracker showed a consensus of $119.5 billion—and roughly double what the company spent in 2025.
This is the same dynamic that split Wall Street when Meta and Microsoft reported last week. But the gap between Alphabet's guidance and expectations was far wider. Meta's $135 billion plan was already priced in. Alphabet's wasn't.
The spending goes toward AI infrastructure—data centers, custom chips, and the computing power needed to run Gemini across Google's product suite. CEO Sundar Pichai framed it as essential: "The risk of underinvesting is dramatically greater than the risk of overinvesting."
Barclays analysts pushed back, noting that infrastructure, DeepMind, and Waymo costs "weighed on overall Alphabet profitability" in Q4 and will continue to do so. The concern isn't that Alphabet is spending—it's the pace. Higher capex drives up depreciation, which pressures margins for years.
Cloud and AI Are Delivering
Set aside the capex shock, and the quarter was strong across the board.
Google Cloud's 48% growth rate is accelerating—it was running at 35% earlier in 2025. The segment generated $17.7 billion in revenue, reflecting enterprise adoption of Gemini-powered tools and infrastructure. For context, that's roughly what all of YouTube generated ($11.4 billion in ad revenue for the quarter, which missed the $11.8 billion estimate by a hair).
The Gemini app now has more than 750 million monthly active users, up from around 350 million at Google I/O last May. That kind of adoption gives Alphabet a distribution advantage that no other AI company can match.
Net income hit $34.5 billion for the quarter, up 30% year-over-year. Free cash flow remains healthy despite elevated spending, though the trajectory will matter more as the capex ramp hits.
Waymo's Expensive Bet
Buried in the results: a $2.1 billion stock-based compensation charge tied to Waymo's latest funding round, which valued the autonomous driving unit at $16 billion. That's a real cost, and it dilutes earnings even as Waymo generates minimal revenue.
RBC analyst Brad Erickson was more forgiving, arguing that Gemini adoption and cloud acceleration "warrant the higher spend." But the market isn't giving Alphabet the benefit of the doubt right now—not when the Nasdaq just dropped 1.5% and the entire tech complex is under pressure.
What Comes Next
Alphabet reports Amazon-scale numbers now. Q4 revenue exceeded Amazon's expected $211 billion annualized run rate from the same period. But the market is treating Alphabet like a utility that just announced a massive construction program—the returns are theoretical, and the costs are immediate.
The stock traded around $198 premarket, down from Wednesday's $208 close. That puts it roughly flat year-to-date after touching new highs in January.
For investors, the question isn't whether Alphabet can spend $185 billion productively. It's whether the market will wait to find out. In this earnings season, patience is in short supply.