- Alphabet beats revenue forecasts, with strong advertising and cloud sales
- Masive capex spend unnerves investors
- Sell in the post market could mean tech rout is not over yet
- Alphabet beats revenue forecasts, with strong advertising and cloud sales
- Masive capex spend unnerves investors
- Sell in the post market could mean tech rout is not over yet
Alphabet’s earnings are out, and they come at an interesting time, when the AI trade is under intense scrutiny and many US tech stocks are selling off. The headline numbers include a large beat on revenues, Q4 revenues came in at $97.23bn, vs. analyst estimates of $95.16bn. Earnings per share were $2.82, beating forecasts of $2.65. Alphabet’s gross profit margin was also very strong at 59.8%.
Alphabet’s profitability has not been hit by its massive capex spend, largely on AI, which rose to $27.85bn last quarter, bringing its total capital expenditure for 2025 to more than $91bn. The focus on this earnings report was always going to be on the forward guidance. The most surprising feature of its forward guidance is the enormous capex pledge for 2026 of $175bn to $185bn, blowing past analyst forecasts of $119.5bn.
How the market reacts to the Alphabet forecasts could determine whether the broader tech and AI sell off continues. The Nasdaq fell 1.5% on Wednesday, led by large double-digit declines for Palantir, Advanced Micro and Applovin. Alphabet’s shares have dipped in the post market and are currently down by approximately 1.5% and are extending gains as we move to the close. This suggests that the selloff in tech may not be over yet.
Alphabet’s capex pledge is huge, and on the surface could be problematic for investors who are sensitive to AI costs. However, investors can’t see the wood for the trees at the moment. They are selling off highly profitable tech stocks, which have already seen their valuations drop in recent months. Alphabet’s strong fundamentals are on show in this earnings report. Google’s advertising revenue was $82bn last year, $2bn more than expected, cloud revenue was also stronger than expected at $17.66bn vs. $16.19bn. The strength in advertising revenues may ease fears about Google’s capex spend because, like Meta, it can afford capex expense due to other areas of the business that are thriving.
Google’s share price has fallen 2% in the past week, and it has outperformed the Nasdaq. While Google’s AI capex spend leaves it vulnerable to the tech sell off and the enhanced scrutiny of AI, its multi stranded business model, and its strong advertising sales, may limit any downside, although a short, sharp sell off is possible.
Tesla and Alphabet results round up
Alphabet and Tesla report earnings 🚩 Google's AI business shines, Tesla accelerates Optimus plans
Daily Summary: Wall Street Stabilizes Despite Higher Oil Prices
All or nothing: ServiceNow earnings preview
This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.
