Alphabet just dropped its fourth-quarter earnings, and while the headline numbers look pretty solid, the real story is buried in what they’re planning to spend next year. We’re talking about potentially $185 billion in capital expenditures for 2026. That’s not a typo. That’s more than double what they spent in 2025.
The company beat expectations on both revenue and earnings, which is nice and all. Revenue jumped almost 18% year over year, and net income climbed nearly 30% to $34.46 billion. Those are impressive numbers by any measure, but everyone’s eyes are glued to that massive spending forecast.
The AI Arms Race Gets Expensive
Here’s the thing about business strategy in 2026: if you’re not pouring billions into AI infrastructure, you’re basically admitting defeat before the battle even starts. Alphabet’s finance chief Anat Ashkenazi made it clear this money is going toward AI compute capacity for Google DeepMind, meeting cloud customer demand, and those perpetually money-losing “Other Bets.”
Google Cloud actually delivered some genuinely impressive results, with revenue up nearly 48% from last year. The backlog more than doubled year over year to hit $240 billion. That’s the kind of growth that justifies heavy spending, at least in theory.
But let’s talk about what didn’t quite hit the mark. YouTube ad revenue came in at $11.38 billion, missing analyst expectations of $11.84 billion. Ashkenazi blamed it on “lapping the strong spend on U.S. election in the fourth quarter of 2024,” which is corporate speak for “last year was unusual, don’t worry about it.” Maybe she’s right, maybe not.
Gemini’s Growth and Waymo’s Weird Accounting
Sundar Pichai threw out an interesting nugget about Gemini having 750 million monthly active users, up from 650 million last quarter. That’s solid growth, and he claims they’ve cut serving costs by 78% through various optimizations. Cost efficiency matters when you’re running AI services at scale, so this isn’t just fluff.
Then there’s Waymo, the self-driving car unit that somehow took a $2.1 billion stock-based compensation charge this quarter. The technology behind autonomous vehicles is fascinating, but the accounting is headache-inducing. Other Bets as a whole lost $3.61 billion, which is more than triple the loss from a year ago.
Fifteen million trips across five cities sounds impressive until you remember how much money they’re burning to make it happen. They just expanded to Miami in January, which means more cities, more trips, and probably more losses in the near term.
The Real Question Nobody’s Asking
What’s fascinating about this earnings report isn’t whether Alphabet can afford to spend $185 billion on AI next year. They obviously can. The question is whether spending that much money actually guarantees they’ll win the AI race, or if they’re just engaged in an expensive game of keeping up with Microsoft and Amazon. Sometimes the company that spends the most isn’t the one that innovates the best, and in a field moving as fast as artificial intelligence, strategic bets might matter more than sheer dollar amounts.
