Alphabet is set to report its fourth-quarter earnings on Wednesday, with investors laser-focused on the company’s AI infrastructure spending, cloud computing wins, and its landmark partnership with Apple. The earnings call comes at a critical time as Google faces mounting pressure to justify massive capital expenditures while maintaining its core search advertising dominance.
Google’s capital expenditure plans are under intense scrutiny following Meta’s announcement that its 2026 capex could nearly double from 2025 levels. In October, Google projected capex between $91 and $93 billion for 2025, with CFO Anat Ashkenazi indicating a “significant” increase expected for 2026. Details about this expansion are anticipated during Wednesday’s earnings call.
The company’s search advertising business remains central to investor concerns, as questions persist about whether OpenAI and other AI competitors are eroding Google’s market dominance. However, Bernstein analysts expressed optimism, noting that Google likely experienced increased query volume in Q4. They cited data from marketing agency Tinuiti showing that Google’s US paid click growth reached its highest level since early 2021, suggesting the core business remains robust.
Google Cloud has emerged as a critical growth driver in the company’s AI strategy, competing fiercely with Amazon and Microsoft for infrastructure deals and AI customers. In Q3, Google reported a 34% year-over-year increase in new cloud customers. Bernstein analysts predict strong cloud performance driven by AI sales, the company’s partnership with Anthropic worth “tens of billions of dollars,” and growing demand for Google’s Tensor Processing Units (TPUs), its proprietary AI chips.
The Apple-Google Gemini partnership represents a watershed moment for both companies. Apple announced it will integrate Google’s Gemini AI models into its revamped Siri assistant, marking the first earnings report since this deal was revealed. Critical questions remain unanswered: the financial terms of the arrangement, whether Google can use query data to train Gemini, and if Apple will utilize Google’s data centers and TPU infrastructure. Investors expect clarity on these details during Wednesday’s call, as the partnership could significantly impact Google’s AI revenue trajectory and competitive positioning against Microsoft-backed OpenAI.
Key Quotes
We also note that the new deal between Anthropic and Google for ’tens of billions of dollars’ worth of compute represents upside to Google Cloud growth, regardless of whether the money flows through Cloud deals or outright TPU sales
Bernstein analysts highlighted the significant financial impact of Google’s Anthropic partnership, emphasizing that this massive compute deal will boost Google Cloud’s performance whether structured as cloud services or direct chip sales, demonstrating the multiple revenue streams Google is developing from its AI infrastructure.
For Tinuiti’s advertisers, Google’s US paid click growth was the highest it has been since early 2021
Bernstein analysts cited data from marketing agency Tinuiti to support their optimistic outlook on Google’s core search business, suggesting that despite AI competition from OpenAI and others, Google’s fundamental advertising engine remains strong and may even be accelerating.
Our Take
Google’s earnings will serve as a critical barometer for AI industry sustainability. The company faces a delicate balancing act: investing aggressively enough to compete with Microsoft and Amazon in AI infrastructure while demonstrating that these investments generate tangible returns. The Apple partnership is particularly fascinating—it represents Google hedging against potential search disruption by embedding Gemini directly into iOS, potentially reaching hundreds of millions of users. However, the lack of transparency around data rights and revenue sharing raises questions about whether this is a defensive move or genuine growth opportunity. The Anthropic deal and TPU business suggest Google is building a diversified AI revenue model beyond just cloud services, positioning itself as both an AI developer and infrastructure provider. If Google can maintain search dominance while scaling cloud AI revenue, it validates the massive capex thesis. Any cracks in either pillar could trigger broader market concerns about AI investment returns.
Why This Matters
This earnings report represents a pivotal moment for the AI industry’s economics and competitive landscape. Google’s spending decisions will signal whether tech giants remain committed to massive AI infrastructure investments or if financial discipline is returning to the sector. The company’s ability to monetize AI through cloud services and partnerships like Apple’s Gemini integration will demonstrate whether AI can transition from cost center to profit driver.
The search advertising performance is particularly significant as it tests whether traditional business models can withstand AI disruption. If Google maintains strong search metrics despite OpenAI’s ChatGPT and other AI alternatives, it suggests AI may complement rather than replace existing platforms. Conversely, any weakness could accelerate the industry’s shift toward conversational AI interfaces.
The Apple partnership fundamentally reshapes mobile AI competition, potentially giving Google unprecedented access to iOS users while challenging Microsoft’s OpenAI alliance. How this deal structures data sharing, revenue splits, and infrastructure usage will establish precedents for future AI partnerships across the industry, influencing everything from chip demand to cloud computing growth trajectories.
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Source: https://www.businessinsider.com/google-q4-2025-earnings-big-things-alphabet-2026-2