Alphabet's Q4 Earnings Beat Estimates, Revenues Increase Y/Y

Alphabet’s GOOGL fourth-quarter 2025 earnings of $2.82 per share beat the Zacks Consensus Estimate by 9.73% and jumped 31.2% year over year. 

Revenues of $113.8 billion increased 18% year over year (17% at constant currency). Net revenues, excluding total traffic acquisition costs (“TAC”) (the portion of revenues shared with Google’s partners and the amount paid to distribution partners and others who direct traffic to Google’s website), were $97.23 billion, which surpassed the consensus mark by 2.58%. The figure rose 19.1% year over year. TAC of $16.59 billion grew 11.8% year over year.

Google Services revenues increased 14% year over year to $95.86 billion and accounted for 84.2% of total revenues. The figure beat the Zacks Consensus Estimate by 1.31%. 

Google Cloud revenues surged 47.8% year over year to $17.66 billion and accounted for 15.5% of the quarter’s total revenues. The figure beat the Zacks Consensus Estimate by 8.70%. Google Cloud ended 2025 at an annual run rate of more than $70 billion, representing a wide breadth of customers, driven by demand for AI products.

Alphabet Inc. Price, Consensus and EPS Surprise

Alphabet Inc. price-consensus-eps-surprise-chart | Alphabet Inc. Quote

GOOGL’s Services Ride on Search & YouTube

Search and other revenues increased 16.7% year over year to $63.07 billion, surpassing the Zacks Consensus Estimate by 2.94%. Search and other revenues accounted for 55.4% of total revenues and 76.7% of Google Advertising revenues. Retail and financial services were the largest revenue contributors. The introduction of AI Overviews and AI Mode has driven growth in overall queries, including commercial queries, and is creating opportunities for people to connect with businesses and shop on search. AI Max and Search are already used by hundreds of thousands of advertisers, making it the fastest-growing AI-powered search ads product.

YouTube’s advertising revenues improved 8.7% year over year to $11.38 billion, missing the consensus mark by 3.70%. YouTube’s annual revenues surpassed $60 billion across ads and subscriptions. Paid subscriptions led by Google One and YouTube Premium have surpassed 325 million. In the fourth quarter of 2025, Shorts averaged more than 200 billion daily views and earned more revenue per watch hour than traditional in-stream on YouTube in several countries, including the U.S. Alphabet has introduced some AI-powered features that are helping creators offer better content on their channels. AI is now automatically identifying products in creators' videos that are more shopper-friendly.

Google advertising revenues increased 13.6% year over year to $82.28 billion and accounted for 72.3% of total revenues. The figure beat the consensus mark by 1.62%. 

However, Google Network revenues decreased 1.6% year over year to $7.82 billion but beat the consensus mark by 0.35%.

Google subscriptions, platforms, and devices revenues, formerly known as Google Other revenues, were $13.57 billion in the fourth quarter, up 16.7% year over year. The figure missed the consensus mark by 0.49%. Other Bets’ revenues were $370 million, down 7.5% year over year, and accounted for 0.3% of the fourth-quarter revenues. The figure missed the consensus mark by 12.36%.

Google Cloud Benefits From Enterprise Adoption

Google Cloud ended the reported quarter with $240 billion in backlog, up 55% sequentially. Nearly 75% of Google Cloud customers utilized Alphabet’s AI products, showcasing the increasing adoption of its AI-powered solutions. 

In fourth-quarter 2025, revenues from products built on Alphabet’s generative AI models (Gemini, Imagen, Veo, Chirp, and Lyria) grew more than 400% year over year, reflecting accelerating adoption. Nearly 350 Google Cloud customers each processed more than 100 billion tokens in December alone, highlighting the increasing adoption and usage of Alphabet’s AI models for various applications.

Alphabet saw double-digit growth in Workspace, driven by an increase in average revenues per seat and the number of seats in the reported quarter.

GOOGL’s Operating Margin Expands Y/Y

Fourth-quarter 2025 costs and operating expenses were $77.89 billion, up 18.9% year over year. As a percentage of revenues, the figure increased 50 basis points (bps) on a year-over-year basis to 68.4%.

The operating margin was 31.6%, which contracted 50 bps year over year.

Segment-wise, Google Services’ operating margin of 41.9% expanded 280 bps year over year. Google Cloud’s operating income was $5.31 billion compared with $2.09 billion reported in the year-ago quarter.

Other Bets reported a loss of $3.61 billion compared with $1.17 billion in the year-ago quarter.

Alphabet’s Balance Sheet Remains Strong

As of Dec. 31, 2025, cash, cash equivalents, and marketable securities were $1.26 billion, up from $98.5 billion as of Sept. 30, 2025.

Long-term debt was $46.54 billion as of Dec. 31, 2025, compared with $21.61 billion as of Sept. 30, 2025. 

Alphabet generated $52.4 billion of cash from operations in the fourth quarter of 2025 compared with $48.41 billion in the third quarter of 2025. GOOGL spent $27.85 billion on capital expenditure, generating a free cash flow of $24.55 billion in the reported quarter.

Alphabet Raises Capital Expenditure Guidance

For 2026, Alphabet now expects to spend capital expenditures between $175 billion and $185 billion. The company expects capital expenditure to increase significantly in 2026.

GOOGL’s Zacks Rank & Stocks to Consider

Alphabet currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Computer and Technology sector include Arista Networks ANET, Advanced Energy AEIS, and Amkor Technology AMKR. While Amkor Technology sports a Zacks Rank #1 (Strong Buy), Arista Networks and Advanced Energy carry a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Arista Networks have gained 6.1% in the trailing six-month period. Arista Networks is set to report fourth-quarter 2025 results on Feb. 12

Shares of Advanced Energy have gained 82.1% in the trailing six-month period. Advanced Energy is slated to report fourth-quarter 2025 results on Feb. 10.

Amkor Technology shares have surged 97.6% in the trailing six-month period. Amkor Technology is set to report fourth-quarter 2025 results on Feb. 9.

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This article originally published on Zacks Investment Research (zacks.com).

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