Google just reported another blockbuster quarter, with fourth-quarter revenue surging beyond Wall Street expectations.
That said, you might think otherwise, given that the stock price plummeted after Google announced plans to double its capital spending in 2026, projecting spending of $175 billion to $185 billion, far higher than analysts’ prior expectations.
Some positive numbers softened the blow as Google’s search advertising and cloud businesses performed well. Google announced that its annual revenue exceeded $400 billion for the first time, with quarterly revenue reaching $113.8 billion, beating expectations of $111 billion. Google Cloud was a particular bright spot, with revenue up 48% year over year.
Here are the biggest takeaways from Alphabet’s earnings conference:
Google is spending a lot of money
Keep large items out of the way. Google announced Wednesday that it expects to spend between $175 billion and $185 billion in capital spending in 2026. The funding will go towards data centers, chips, construction materials and other components needed to build and support Google’s AI efforts.
That’s a huge number. Google previously warned that capital spending would be higher than last year, when it was just over $90 billion. The updated outlook for 2026 beat street expectations, and the stock fell 2% after an otherwise very healthy earnings report.
Google’s capital spending estimates are even higher than Meta’s expectations, with Meta announcing last week that it expects to spend between $115 billion and $135 billion in 2026, nearly double what it spent last year.
Gemini Rising
Google said its Gemini app currently has more than 750 million monthly active users. This is an increase of 100 million cases from October last year.
“Especially since the launch of Gemini 3 in December, we’ve seen a significant increase in engagement per user,” Google CEO Sundar Pichai said on a conference call Wednesday.
While the trend in the graph is in the right direction, it also signals a slowdown, as Google announced in October that it gained 200 million additional users in the third quarter thanks to the rollout of its viral Nano Banana image generator.
A subscription business comparable to Netflix
Google announced Wednesday that it currently has more than 325 million paid subscriptions across its consumer services, the most popular of which are Google One and YouTube Premium.
To put that number into perspective, Netflix announced last month that it had reached 325 million subscribers. This is not a complete apples-to-apples comparison. For example, Netflix does not have a cloud storage product. Still, it’s clear that YouTube accounts for a large portion of those users, which should be enough to make Netflix’s leaders wary.
AI is cheaper to run
Google likes to talk about the advantages of full-stack AI. Owning everything from its AI models to its cloud servers and chips gives Google more control over the technology and how it all fits together.
On Wednesday’s conference call, Pichai emphasized that Google is benefiting significantly from this by reducing Gemini’s cost per service by 78% compared to 2025 “through model optimization, efficiency, and utilization improvements.”
CEO Sundar Pichai says SaaS clean-up is overblown
Software stocks tumbled this week after Anthropic announced new features to help people in the legal industry perform administrative and administrative tasks.
Could this be another “DeepSeek moment,” as Evercore senior managing director Mark Mahaney suggested on a conference call? Pichai suggested this week’s scramble might be overblown.
“I think this is an effective tool in the same way it’s been an effective tool across our products and services, including search and YouTube,” Pichai said of Gemini, adding that companies that are “seizing this moment” will “continue to have the same opportunity.”
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