Alphabet tops $400B in annual revenue as cloud surges 48%
Google Cloud reaches $17.7B quarterly revenue with $70B annual run rate driven by AI demand
Alphabet delivered blockbuster fourth-quarter results that propelled the technology giant past $400 billion in annual revenue for the first time, as its cloud computing business accelerated amid surging demand for artificial intelligence infrastructure.
The company reported fourth-quarter earnings per share of $2.82, comfortably beating analyst estimates of $2.27 by 24.5%. Revenue reached $113.8 billion, exceeding the $100.1 billion consensus forecast by 13.7%, according to the company's earnings announcement. Alphabet shares rose 0.4% in after-hours trading following the release.
The standout performance came from Google Cloud, which surged 48% year-over-year to $17.7 billion in quarterly revenue. The division has now reached a $70 billion annualized run rate, cementing its position as the world's second-largest cloud provider behind Amazon Web Services. The growth was driven by enterprises accelerating their AI workloads and infrastructure investments.
"Cloud growth has accelerated as enterprises across every industry are adopting our AI infrastructure and generative AI solutions at scale," the company stated in its earnings materials, noting that the cloud division's operating margin expanded significantly during the quarter.
For the full fiscal year 2025, Alphabet generated $402.8 billion in revenue, marking the first time the company has surpassed the $400 billion threshold in its history. The milestone underscores how deeply embedded Google's services have become across the global digital economy, from search and advertising to enterprise cloud and consumer hardware.
Looking ahead, Alphabet provided aggressive capital expenditure guidance of $175 billion to $185 billion for 2026, focused almost entirely on building out AI infrastructure. The planned spending represents a significant increase from 2025 levels and signals management's confidence in sustained demand for AI computing capacity.
The substantial investment in data centers and AI chips reflects both an opportunity and a challenge for the company. While AI infrastructure spending is expected to drive future growth, it will also pressure near-term margins as Alphabet competes with Microsoft and Amazon in the race to build the computing backbone for the next generation of artificial intelligence applications.
Alphabet's strong quarterly performance contrasts with recent market volatility in technology stocks. The company's shares had fallen more than 2% during regular trading on Tuesday, but remain near their 52-week high of $345.17 and have more than doubled from their 52-week low of $142.27. The stock currently trades at 34 times trailing earnings, reflecting investor expectations for continued growth.
Analysts remain broadly bullish on Alphabet's prospects, with 58 of 66 analysts surveyed rating the shares a buy or strong buy. The consensus price target of $336.57 suggests modest upside from current levels, though the aggressive AI spending plans could drive increased investor scrutiny of capital efficiency.
The earnings report comes as Alphabet navigates intensifying competition across its core businesses. Google Cloud's strong growth positions the company to capture market share in the enterprise AI market, though it faces fierce competition from Microsoft's Azure and Amazon Web Services. Meanwhile, the company's search advertising business continues to generate substantial cash flow that funds its AI investments.
Alphabet's board of directors has authorized a new share repurchase program, reflecting confidence in the company's financial position and ability to generate excess cash flow even while investing heavily in AI infrastructure. The company ended the quarter with $110 billion in cash and marketable securities.
Investors will be watching for more details on Alphabet's AI strategy during the earnings conference call scheduled for later this week. Specific areas of interest include the monetization path for generative AI products, progress on custom AI chips, and the timeline for achieving profitability in newer AI initiatives.