After-hours volatility! Google announces "massive" capital expenditure

Local time February 4th, Google parent company Alphabet released its Q4 FY2025 report. The financial report shows that Alphabet’s revenue for the fourth quarter was $113.8 billion, an 18% year-over-year increase, marking a new quarterly record after surpassing $100 billion for the first time in Q3; earnings per share were $2.82, up 31% year-over-year; net profit was $34.5 billion, a 30% increase.

In terms of future outlook, CEO Sundar Pichai expects the company’s capital expenditure for the full year 2026 to be between $175 billion and $185 billion. Compared to $91 billion in capital expenditure in 2025, this guidance nearly doubles and significantly exceeds market expectations. After the earnings release, Google’s stock price experienced intense volatility.

Cloud Business Grows 48%

Responding to Massive Capital Spending as “Focusing on the Future”

“This year’s capital expenditure is aimed at focusing on the future,” Pichai explained, stating that this level of spending is to support the development of cutting-edge models at Google DeepMind and to meet the surge in cloud customer demand. He pointed out that current computing capacity remains tight.

CFO Ruth Porat added that 2026 will be similar to 2025, with about 60% of capital expenditure allocated to servers and 40% to data centers and network equipment, which are long-cycle assets. She also warned that as infrastructure investments increase, depreciation expenses will rise significantly, and the depreciation growth rate in 2026 is expected to accelerate further, putting ongoing pressure on the profit statement.

Regarding specific business areas, cloud services have become a notable highlight. The financial report shows that Alphabet’s cloud revenue for Q4 was $17.7 billion, a 48% increase year-over-year. Pichai revealed that the company’s full-year 2025 revenue exceeded $400 billion for the first time, with Google Cloud’s annualized revenue surpassing $70 billion.

In Q4, Google services revenue was $96 billion, up 14% year-over-year, mainly driven by accelerated growth in search. Search and other business segments grew 17%, supported by broad advantages across all major verticals, especially retail. On YouTube, ad revenue increased 9%, driven by direct response advertising. Network alliance ad revenue declined 2% year-over-year this quarter.

Regarding customer partnerships, Pichai officially announced that Google is working with Apple, becoming its preferred cloud provider, and developing the next-generation Apple Foundation model based on Gemini technology. During last week’s Apple earnings call, CEO Tim Cook also confirmed this news.

Gemini Monthly Active Users Surpass 750 Million

Will Bring Significant Growth Opportunities for Software Companies

Recently, with Anthropic launching legal automation tools, market fears of “AI disrupting traditional software business models” have spread, causing a sharp decline in the US stock software sector. Pichai disagreed with this view. He believes AI also presents significant growth opportunities for software companies.

“Gemini is becoming the world’s most successful AI engine for software companies,” Pichai countered, citing data to prove that SaaS giants are embracing rather than fleeing AI: “Among the top 20 SaaS companies, 95% are using Gemini, as are over 80% of the top 100 companies, including Salesforce and Shopify.”

Pichai stated that companies that seize this moment will have similar growth opportunities. SVP and Chief Business Officer Schindler also said that successful SaaS clients are deeply integrating Gemini into key workflows, and from a token usage perspective, growth in Q4 was very strong.

During the earnings call, Pichai revealed that Gemini applications now have over 750 million monthly active users, with user engagement significantly increasing since the launch of Gemini 3.

“Gemini applications experienced a very significant growth phase in Q4,” said Philip Schindler. Not only did the number of monthly active users increase, but user engagement per user also improved substantially. Whether in active usage, usage intensity, or retention rates, all showed clear progress across iOS, Web, Android platforms, and globally.