Google parent company Alphabet delivered a blockbuster fourth-quarter earnings report, with revenue soaring to $113.8 billion, surpassing Wall Street estimates of $111 billion. The tech giant announced its annual revenue exceeded $400 billion for the first time in company history. However, the stock dipped 2% following the announcement of an unprecedented $175-185 billion capital expenditure plan for 2026—nearly double the $90 billion spent in 2025.
This massive investment will fund data centers, AI chips, and infrastructure necessary to support Google’s ambitious artificial intelligence initiatives. The spending figure exceeds even Meta’s aggressive $115-135 billion capex guidance for 2026, signaling an intensifying AI arms race among tech giants.
Google Cloud emerged as a standout performer, with revenues surging 48% year-over-year, demonstrating strong enterprise demand for AI-powered cloud services. CEO Sundar Pichai highlighted that Gemini, Google’s flagship AI assistant, now boasts over 750 million monthly active users—an increase of 100 million since October 2024. Engagement has intensified significantly following the December launch of Gemini 3, though growth appears to be moderating compared to Q3’s 200 million user gain.
In the consumer subscription space, Google announced 325 million paid subscriptions across services including Google One and YouTube Premium—matching Netflix’s subscriber count and positioning the company as a major player in the subscription economy.
Pichai also revealed impressive efficiency gains from Google’s full-stack AI approach, with Gemini’s serving unit costs dropping 78% throughout 2025 through model optimizations and infrastructure improvements. This vertical integration—controlling everything from AI models to chips and cloud servers—gives Google significant competitive advantages in cost management.
Addressing concerns about AI disrupting the SaaS industry following Anthropic’s recent product announcements, Pichai downplayed fears of a “DeepSeek moment,” characterizing AI as an “enabling tool” that will create opportunities for companies that embrace the technology rather than wholesale replacement of existing software businesses.
Key Quotes
We are also seeing significantly higher engagement per user, especially since the launch of Gemini 3 in December
Google CEO Sundar Pichai emphasized not just user growth but deepening engagement with Gemini, suggesting the AI assistant is becoming more integral to users’ daily workflows and demonstrating product-market fit beyond initial curiosity-driven adoption.
I think it is an enabling tool, just like it has been an enabling tool for us across our products and services, be it Search, YouTube, etc
Pichai responded to concerns about AI disrupting the SaaS industry, arguing that companies embracing AI as an enhancement tool rather than viewing it as a threat will find new opportunities, pushing back against fears of wholesale software industry displacement.
lowering Gemini’s serving unit costs by 78% over 2025 through model optimizations, efficiency, and utilization improvements
This dramatic cost reduction demonstrates Google’s full-stack advantage in AI, where controlling the entire technology stack from chips to models enables unprecedented efficiency gains that could provide sustainable competitive advantages over rivals relying on third-party infrastructure.
Our Take
Google’s earnings reveal the paradox of AI leadership: massive success requiring even more massive investment. The stock’s negative reaction despite strong results shows investor anxiety about whether these unprecedented capital expenditures will generate proportional returns. However, the 78% cost reduction for Gemini suggests AI economics are improving rapidly—if this trend continues, today’s infrastructure investments could yield extraordinary margins tomorrow. The real story is the consolidation of AI power among a handful of companies capable of $100+ billion annual spending. This creates formidable barriers to entry and may determine technology leadership for decades. Google’s 750 million Gemini users and booming cloud business demonstrate execution, but the company must now prove it can monetize AI at scale to justify this historic spending spree.
Why This Matters
This earnings report underscores the unprecedented scale of investment required to compete in the AI era, with Google’s $175-185 billion capex representing one of the largest technology infrastructure buildouts in history. The spending surge reflects the industry’s conviction that AI will fundamentally reshape computing and business, despite uncertain near-term returns.
Gemini’s 750 million user milestone demonstrates rapid consumer adoption of AI assistants, validating Google’s strategy of integrating AI across its product ecosystem. The 78% cost reduction in serving Gemini shows that AI economics are improving faster than many expected, potentially accelerating profitability timelines.
Google Cloud’s 48% growth signals strong enterprise AI demand, as businesses rush to implement AI capabilities. The comparison to Netflix’s subscriber base highlights Google’s successful diversification beyond advertising into recurring revenue streams. Most significantly, this arms race between Google, Meta, and other tech giants will determine who controls the AI infrastructure layer—potentially the most valuable technology platform of the next decade. Companies unable to match this spending may find themselves permanently disadvantaged in the AI economy.
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Source: https://www.businessinsider.com/google-q4-2025-earnings-ai-spending-gemini-subscriptions-2026-2