Alphabet to grow Google Cloud revenue 1.5 times and double AI capex

Google parent company Alphabet's fourth-quarter 2025 results beat Wall Street's expectations. It reported a 1.5-fold increase in revenue for its Google Cloud division, which is tied to all of its AI projects. The company said its investment in AI is paying off and announced a colossal spending on AI infrastructure in 2026. That sent shares of AI chip makers soaring, although Alphabet's own securities fell 2% in extended trading.

Alphabet's quarterly revenue rose 18% year-on-year to $113.83 billion in 2024. Analysts, according to LSEG, were expecting $111.43 billion, CNBC writes. Net income rose 30% to $34.46 billion, or $2.82 per share, while Wall Street had forecast $2.63. In addition, unlike some other cloud providers, Google is showing expansion in operating margin: it reached 30.1% versus 17.5% a year earlier and expectations of 22.7%, Barron's notes.

Revenue for Google Cloud division jumped 48% in the fourth quarter to $17.66 billion. Analysts' estimates had suggested it would be $16.18 billion, according to StreetAccount. The Google Cloud division hosts most of the company's AI services and products.

"We see our investments in AI and infrastructure driving revenue growth and development across all areas," Alphabet CEO Sundar Pichai said in a press release. - Search is being used more frequently than ever, and AI continues to drive growth."

Against this background, the company announced that it expects to significantly increase spending on artificial intelligence in 2026 - much stronger than the market had allowed. Alphabet expects its capital expenditures to be between $175 billion and $185 billion - almost double what it will spend in 2025, CNBC points out. Even the lower end of that range exceeds analysts' expectations by nearly 50%, according to an estimate cited by Bloomberg.

Alphabet shares reacted to the release of the report with a sharp drop in extended trading, before recovering losses and entering plus 1.8% before falling back below 2% from Wednesday's closing price in main trading.

At the same time, the capex forecast gave a boost to the securities of semiconductor companies Nvidia and Broadcom, CNBC writes. They rose in extended trading by 1.9% and 5.5%, respectively. Ben Reitzes of Melius Research said on the channel that Alphabet's massive spending will be at the mercy of Broadcom and other Google suppliers. Much of Google's AI software does not run on industry-standard Nvidia chips, but on its own Tensor Processing Units (TPUs) produced in partnership with Broadcom. "It's probably good for Nvidia, too, because they'll be spreading the load not only on their own TPUs, but also on Nvidia chips," the analyst said.

The news is supplemented.

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