Skip to content
    GOOGL
    Earnings call· Dec 2025(Q4 FY25)

    Alphabet Q4 FY25 earnings call GOOGL

    Feb 4, 2026 Source

    Executive summary

    Alphabet Q4 FY25 — AI Investments Drive Record Revenues and Cloud Acceleration

    Alphabet delivered a strong quarter, with record annual revenues driven by accelerating growth in Search and Cloud, fueled by substantial AI investments. The company is seeing broad adoption of its Gemini models and AI-powered features across its product portfolio, leading to increased user engagement and monetization opportunities. Significant CapEx is planned for 2026 to meet surging AI demand, with a continued focus on operational efficiency to fund these strategic initiatives.

    Highlights

    5

    • Alphabet annual revenues exceeded $400 billion for the first time in FY25.

    • Search revenue grew 17% in Q4 FY25, accelerating from prior periods.

    • Google Cloud revenue accelerated significantly, growing 48% in Q4 FY25 to an annual run rate over $70 billion.

    • Google Cloud backlog grew 55% quarter-over-quarter to $240 billion, driven by AI demand.

    • Gemini app reached over 750 million monthly active users, with significantly higher engagement.

    Concerns

    4

    • Network advertising revenues were down 2% year-on-year in Q4 FY25.

    • YouTube advertising revenue growth of 9% was negatively affected by lapping strong U.S. election spend in Q4 2024.

    • Alphabet's operating income and margin were negatively impacted by a $2.1 billion stock-based compensation charge related to Waymo's valuation.

    • The company expects to remain supply-constrained for AI compute capacity throughout 2026 despite significant CapEx investments.

    Guidance & targets

    4
    CategoryTargetConfidence
    Full-year 2026 CapEx
    $175 billion to $185 billion
    high materiality
    High
    Q1 FY26 Consolidated Revenues
    FX tailwind
    medium materiality
    Medium
    Full-year 2026 Depreciation growth rate
    accelerate in Q1 and meaningfully increase for the full year
    medium materiality
    High
    Hiring in key investment areas
    continue hiring
    low materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Google Services
    Strong growth in search and subscriptions drove Google Services revenue. Operating income increased 22%.
    Operating Margin: 41.9%Google Search and other advertising revenues: $63.1 billion (up 17%)YouTube advertising revenues: $11.4 billion (up 9%)Network advertising revenues: $7.8 billion (down 2%)Subscription platforms and devices revenues: $13.6 billion (up 17%)
    		$95.9 billion14%—$40.1 billion
    Google Cloud
    Outstanding results driven by strong demand for enterprise AI products, particularly GCP. Operating income more than doubled.
    Operating Margin: 30.1% (up from 17.5% YoY)Backlog: $240 billion (up 55% sequentially, more than doubled YoY)New customer velocity: double vs Q1Deals over $1 billion in 2025: surpassed previous 3 years combinedExisting customers outpacing initial commitments: over 30%Customers using vertically optimized AI: nearly 75%AI customers use 1.8x as many productsProduct lines exceeding $1 billion annual revenue: 14Customers processing >100 billion tokens (Dec): nearly 350Revenue from products built on generative AI models: grew nearly 400% year-over-yearEnterprises using Gemini: more than 120,000Top 20 SaaS companies using Gemini: 95%Top 100 SaaS companies using Gemini: over 80%Paid seats of Gemini Enterprise: more than 8 millionCompanies using Gemini Enterprise: more than 2,800Gemini Enterprise customer interactions: over 5 billion (up 65% YoY)Revenue from AI solutions built by partners: increased nearly 300% year-over-yearCommitments from top 15 software partners: grew more than 16x year-over-year
    		$17.7 billion48%—$5.3 billion
    Other Bets
    Operating loss reflects a significant Waymo charge. Waymo continues to expand its service territory and autonomous trips.
    Operating loss includes $2.1 billion Waymo stock-based compensation chargeWaymo fully autonomous trips: surpassed 20 millionWaymo rides per week: more than 400,000
    		$370 million——-$3.6 billion

    Operational metrics

    27
    Alphabet Consolidated Revenues
    $403 billionup 15% on a reported and constant currency basis
    FY25

    First time Alphabet annual revenues exceeded this amount.

    Alphabet Consolidated Revenues
    $113.8 billionup 18% or 17% in constant currency
    Q4 FY25

    Driven by acceleration in Search and Cloud revenues.

    Stock-based compensation charge (Waymo)
    $2.1 billion
    Q4 FY25

    Due to an increase in Waymo's valuation related to an investment round; vast majority reflected in R&D expenses.

    Total Cost of Revenue
    $45.8 billionup 13%
    Q4 FY25

    Includes TAC and other costs.

    Other Cost of Revenues
    $29.2 billionup 13%
    Q4 FY25

    Primarily driven by depreciation associated with technical infrastructure, content acquisition costs for YouTube, and other technical infrastructure operations costs.

    Total Operating Expenses
    $32.1 billionup 29%
    Q4 FY25

    Includes R&D, Sales & Marketing, and G&A expenses.

    R&D Expense Growth
    42%
    Q4 FY25

    Driven by compensation (including Waymo charge) and investment in AI talent.

    Sales and Marketing Expenses Growth
    12%
    Q4 FY25

    Primarily driven by marketing investments to support the Gemini app and Search.

    G&A Expenses Growth
    21%
    Q4 FY25

    Primarily due to a shift in timing of charitable contributions.

    Alphabet Operating Income
    $35.9 billionup 16%
    Q4 FY25

    Negatively impacted by the $2.1 billion Waymo charge.

    Alphabet Operating Margin
    31.6%
    Q4 FY25

    Negatively impacted by the $2.1 billion Waymo charge.

    Other Income and Expenses
    $3.2 billion
    Q4 FY25

    Primarily due to unrealized gains in nonmarketable equity securities portfolio.

    Alphabet Net Income
    $34.5 billionup 30%
    Q4 FY25

    Strong increase driven by overall performance.

    Alphabet Diluted EPS
    $2.82up 31%
    Q4 FY25

    Strong increase driven by overall performance.

    Cash and Marketable Securities
    $126.8 billion
    end of Q4 FY25

    Balance at the end of the quarter.

    Long-term Debt
    $46.5 billion
    end of Q4 FY25

    Balance at the end of the quarter.

    Capital Expenditure
    $27.9 billion
    Q4 FY25

    In line with expectations.

    Share Repurchase
    $5.5 billion
    Q4 FY25

    Capital returned to shareholders.

    Dividend Payments
    $2.5 billion
    Q4 FY25

    Capital returned to shareholders.

    Depreciation Expense
    $21.1 billionup 38% from $15.3 billion in 2024
    FY25

    Reflects increased CapEx investments in recent years.

    ML Compute Allocation to Cloud
    just over half
    for 2026

    Expected allocation of machine learning compute capacity.

    Coding Productivity (Agents)
    50%
    current

    Approximately 50% of code is written by agents, reviewed by engineers.

    YouTube Paid Subscriptions
    over 325 million
    across consumer services

    Strong adoption for Google One and YouTube Premium.

    YouTube #1 Streamer in US
    3 years
    current

    According to Nielsen, YouTube continues to be the #1 streamer in the U.S. for nearly 3 years.

    NFL Sunday Ticket Subscriber Growth
    highest paid subscriber number ever
    current

    Strong subscriber growth with YouTube.

    YouTube Podcasts Watched (Living Room)
    700 million hoursup 75% from just a year prior
    October 2025

    Illustrates YouTube's popularity on living room devices.

    Waymo Markets
    6th market, Miami
    launched 2 weeks ago

    Waymo continues to expand its service territory.

    Industry KPIs

    9
    MetricValueDetails
    Family dap dau750 millionusers
    Cloud backlog rpo$240 billionUSD
    CAPEX compute commitments$91.4 billionUSD
    Search query volume trend—
    Cloud segment revenue growth$17.7 billionUSD
    Advertising revenue by segment—
    Ai feature adoption monetization—
    Custom silicon ai infrastructure—
    Ad impressions growth vs average price per ad—

    Product announcements

    11
    ProductTypeDetails
    Gemini 3launch
    Google Antigravitylaunch
    Personal intelligence in AI mode in Search and Gemini applaunch
    New features to Gmail and updated viewupdate
    Chrome as an AI-first agentic browser (Chrome Auto Browse)update
    Project Genielaunch
    Universal Commerce Protocollaunch
    Pixel 10alaunch
    AI Overviews upgraded to Gemini 3update
    New YouTube TV planslaunch
    Waymo service expansionexpansion

    Deals & partnerships

    5
    Intersectacquisition

    Alphabet announced its intent to acquire Intersect in December 2025, which provides data center and energy infrastructure solutions.

    Applepartnership

    Alphabet is collaborating with Apple as their preferred cloud provider and to develop the next generation of Apple Foundation Models based on Gemini technology.

    Reliance Jiopartnership18-month

    Partnership to provide over 500 million consumers with an 18-month free trial of the Gemini suite of products and 2 terabyte of cloud storage. Reliance Enterprise customers will also get access to Google Cloud's Gemini Enterprise and TPUs.

    The Home Depotcustomer contract

    The Home Depot is applying Google AI across the board from cloud tools to AI-powered ads and YouTube creator partnerships. Their investments in PMax and YouTube creator partnerships have resulted in double-digit increase in ad clicks and visits.

    Waymo investors (including Alphabet)investment round$16 billion

    Waymo raised its largest investment round to date, totaling $16 billion, with Alphabet funding a significant portion.

    Risks & headwinds

    5
    Negative impact on YouTube advertising revenue from lapping prior year's strong U.S. election spendQ4 FY25

    9% growth negatively affected

    Mitigation: Focus on direct response, subscriptions, and new ad formats like shoppable mastheads; expanding creator partnership hub.

    Negative impact on Alphabet operating income and Other Bets operating loss due to Waymo stock-based compensation chargeQ4 FY25

    $2.1 billion

    Mitigation: Waymo investment round aims to accelerate global expansion and create long-term value.

    Supply-constrained environment for cloud and AI compute capacityFY26

    expected to go through the year in a supply-constrained way

    Mitigation: Significant CapEx investments ($175B-$185B for FY26) in technical infrastructure, including servers and data centers; long-term planning for supply chain.

    Increased depreciation expense and data center operations costs (e.g., energy) due to higher CapExFY26

    growth rate in 2026 depreciation to accelerate in Q1 and meaningfully increase for the full year

    Mitigation: Ongoing focus on efficiency and productivity across the business, including technical infrastructure and internal operations.

    Volatility in exchange rates affecting consolidated revenuesQ1 FY26

    could affect the impact of FX on Q1 revenues

    Q&A highlights

    7

    What progress was made in agentic commerce in 2025 and what are the 2026 opportunities? How will new content creation models like Genie integrate into YouTube?

    Sundar explained that 2025 focused on laying the foundation for agentic commerce, including developing the Universal Commerce Protocol with partners. He expects 2026 to see consumers actively using these features. For YouTube, he highlighted Genie's potential for building worlds and emphasized integrating AI tools to empower creators, ensuring YouTube remains a platform for creator expression.

    “I think this is a year where you will see consumers actually being able to use all of this, and I'm excited about the opportunity ahead.”

    asked by Brian Nowak · answered by Sundar Pichai

    2 min read6 chapters

    Detailed Narrative

    01

    AI-Driven Product Innovation and Adoption

    Alphabet's AI investments are driving significant product innovation and user adoption. The launch of Gemini 3 was a major milestone, leading to the Gemini app reaching over 750 million monthly active users with increased engagement. AI Mode in Search, now powered by Gemini 3, has doubled daily queries per user in the U.S. and features queries that are 3x longer than traditional searches. New AI features were also introduced across Gmail, Chrome, and Project Genie for interactive world generation, alongside the Universal Commerce Protocol for agentic commerce.

    02

    Google Cloud's Accelerated Growth and AI Demand

    Google Cloud delivered outstanding results, with revenue accelerating 48% year-over-year to an annual run rate exceeding $70 billion. The backlog surged 55% quarter-over-quarter to $240 billion, reflecting strong demand for AI products. Cloud is winning new customers faster, signing larger commitments (deals over $1 billion surpassed the previous three years combined), and seeing existing customers outpace initial commitments by over 30%. Nearly 75% of Cloud customers utilize vertically optimized AI, and revenue from generative AI models grew nearly 400% year-over-year.

    03

    Search and YouTube Monetization Strength

    Search revenue grew 17%, driven by broad strength across all major verticals, particularly retail. AI is enhancing ads quality and advertiser tools, with Gemini models improving query understanding and enabling advertisers to create nearly 70 million creative assets in Q4. YouTube's annual revenues surpassed $60 billion, with advertising revenue up 9% driven by direct response. Subscriptions, especially YouTube Music and Premium, showed strong growth, and Shorts now average over 200 billion daily views.

    04

    Strategic Capital Allocation for AI Infrastructure

    Alphabet is significantly increasing its CapEx, guiding to $175 billion to $185 billion for FY26, up from $91.4 billion in FY25. This investment is primarily for technical infrastructure, with approximately 60% allocated to servers and 40% to data centers and networking equipment. Over half of the ML compute capacity for 2026 is expected to be directed towards the Google Cloud business, underscoring the commitment to meet surging AI demand and maintain a competitive edge.

    05

    Operational Efficiency and Waymo Progress

    The company continues to focus on driving operational efficiencies, including using AI for coding productivity (50% of code written by agents) and internal business operations. Waymo, an Other Bet, raised a $16 billion investment round, with Alphabet funding a significant portion. Waymo surpassed 20 million fully autonomous trips, provides over 400,000 rides weekly, and expanded its service to Miami, with further expansions planned for the U.S., U.K., and Japan.

    06

    Partnerships and Ecosystem Expansion

    Alphabet announced a collaboration with Apple to be its preferred cloud provider and to develop next-generation Apple Foundation Models based on Gemini technology. A partnership with Reliance Jio will provide 500 million consumers with an 18-month free trial of the Gemini suite and 2TB cloud storage, while Reliance Enterprise customers gain access to Google Cloud's Gemini Enterprise and TPUs. These collaborations highlight the expanding reach and impact of Google's AI and cloud offerings.

    AI-generated summary of the company’s earnings call. Not investment advice.