As at 20 February 2026

Executive Summary

Key highlights

In this report, we revisit Alphabet’s (GOOGL) 4Q25 results, released in February 2026.

Financial results at a glance:

• The 4Q25 Group revenue increased 18% YoY to $113.8 billion, supported by Google Cloud growth and Google Search resilience.

• Net income rose 30% to $34.5 billion and EPS increased 31% to $2.82, supported by the $70 billion share repurchase program.

• Google Cloud: Revenue grew 48% YoY to $17.7 billion, driven by demand for AI infrastructure and generative AI solutions. As part of the 2026 strategy, Alphabet will serve as the preferred cloud provider to Apple Inc and help power the next generation of Apple Intelligence features using Gemini technology.

• Google Search: Revenue grew 17% YoY to $63.1 billion, accelerated by the launch of Gemini 3. The major rollout of new AI features in Search and launch of Gemini 3 in December 2025 have driven ‘AI Mode’ queries that are 3x longer than traditional search. These can lead to add-on services that translate to higher margin service revenue.

• Subscriptions: Paid subscriptions surpassed 325 million, with a 14% improvement YoY, led by Google One and YouTube Premium. YouTube is benefitting from the success of NFL Sunday.

• Waymo, Alphabet’s autonomous driving unit, is delivering +400 000 weekly rides and attracting further investment. 

Analyst thesis

Our recommendation is based on:

• Alphabet is successfully defending its core advertising and search engine businesses by evolving keyword-based search into conversational intent. The integration of Gemini into Search not only protects the Group's competitive position; it expands it by surfacing higher-value, targeted ads within artificial intelligence (AI) overviews.

• YouTube is undergoing a long‑term shift. Short videos (shorts) and connected TV (CTV) viewing help brands reach vast audiences and build awareness, while new shopping features allow viewers to purchase products directly from the videos. Together, this helps YouTube turn attention into sales and helps boost advertising revenue.

• Google Cloud remains the primary growth accelerator, fuelled by a $240 billion backlog. The current surge in AI workload demand is expected to unwind into a mature, high-margin utility phase by 2028.

• Alphabet has raised its 2026 CAPEX guidance to $185 billion, signalling a strong commitment to realising AI-driven gains. However, this raises concerns over the headwind to free cash flow and the time pressure to justify substantial spending and near-term returns on investment.