Google parent Alphabet delivered a landmark financial performance as its annual revenue crossed $400 billion for the first time, driven by strong growth in advertising, cloud computing, and artificial intelligence-powered services.
The company reported blockbuster earnings on Wednesday, highlighting how massive investments in AI infrastructure and cloud computing are translating into accelerating revenue growth, even as demand for AI products continues to exceed supply.
Alphabet said its revenue climbed 18 percent year-on-year in the quarter, with overall annual revenue topping $400 billion — a historic milestone for the company founded by Larry Page and Sergey Brin in 1998.
However, the tech giant signalled that spending will rise sharply as the AI arms race intensifies across Silicon Valley.
Alphabet said it expects capital expenditures between $175 billion and $185 billion in 2026, nearly double its 2025 spending, as it races to expand data centres, computing infrastructure and AI capacity to meet customer demand.
Despite relentless investment, Alphabet CEO Sundar Pichai said supply remains tight.
"We've been supply constrained even as we've been ramping up our capacity," Pichai said on an earnings call.
Following the results, Alphabet shares slipped slightly more than one percent in after-market trading.
Google’s flagship AI model Gemini continued its rapid adoption, ending the year with 750 million monthly users, an increase of 100 million from the previous quarter.
Industry observers believe Google is closing the gap with rivals.
"We expect Google to overtake OpenAI this year for the top spot in AI," said Emarketer analyst Nate Elliott.
Alphabet generated $113.8 billion in revenue in the final three months of 2025, according to earnings figures, powered primarily by its core search business and fast-growing cloud unit.
The company posted a profit of $34.5 billion in the quarter.
Revenue from cloud computing soared 48 percent to $17.7 billion, underlining the division’s emergence as a major growth engine as enterprises accelerate AI adoption.
"We're seeing our AI investments and infrastructure drive revenue and growth across the board," Pichai said.
Google’s search and advertising business remained the company’s largest revenue driver, generating $82.3 billion, up from $72.5 billion a year earlier.
YouTube advertising revenue also showed solid growth, rising to $11.4 billion from $10.5 billion.
The steady cash flow from online advertising continues to give Alphabet a strategic advantage in funding massive AI infrastructure investments.
Google said it now counts more than 325 million paid subscriptions across its consumer services, including Google One and YouTube Premium, further strengthening its diversified revenue base.
Alphabet’s cloud division, which competes directly with Amazon Web Services and Microsoft Azure, has become a key pillar of its long-term growth strategy, benefiting directly from AI-driven enterprise demand.
Alphabet also continues to benefit from a US court ruling late last year that spared the company from being forced to sell its Chrome browser to address monopoly concerns.
However, Google recently informed the court that it will appeal the federal judge’s ruling that it held an illegal monopoly in online search, according to court records.
Despite strong overall growth, Alphabet’s experimental “Other Bets” division, which includes autonomous driving unit Waymo, posted a loss of $3.6 billion on revenues of just $370 million.
Waymo said this week it raised $16 billion in a funding round that valued the self-driving car company at $126 billion. Alphabet was the majority investor in the round.
Waymo co-chief executives Tekedra Mawakana and Dmitri Dolgov described the funding as a major milestone.
"This infusion of capital will ensure we are positioned to move forward with unprecedented velocity, while maintaining our industry-leading safety standards," Dolgov and Mawakana said in a blog post.
Last year, Waymo more than tripled its annual volume to 15 million rides and now provides more than 400,000 rides weekly across six major US metropolitan areas, according to the company.
Conclusion: AI at the Core of Alphabet’s Next Growth Phase
Alphabet’s results underscore how AI, cloud computing, and advertising continue to reinforce one another, pushing Google past the $400 billion annual revenue milestone for the first time. With capital spending set to surge and AI demand still outpacing supply, Alphabet appears poised to remain at the centre of the global technology and artificial intelligence race.