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After a tough couple of days in the market for technology investors, they may have a little consolation: alphabet Profits are out, they’re good. Wall Street He probably only had one note…mind your money.
Going into Wednesday’s report, it appears that online finance communities are lagging far behind the results achieved by Google’s parent company. Up 70% over the past six months, the search and advertising giant has become a huge tech momentum trader. There have been pockets of panic that if Alphabet doesn’t turn a profit, it will exacerbate the recent tech selloff that has found a foothold in the media and sparked some jitters among its followers.
A quick look at Alphabet’s fourth-quarter earnings
As we covered in ours Daily blog for today’s stock marketThe results exceeded the upper and lower limits:
- Fourth quarter revenue: $113.83 billion (approximately $111.4 billion)
Cloud revenue: $17.66 billion (estimated $16.2 billion) - Earnings per share for the fourth quarter: $2.82 (est. $2.65)
In fact, the only real obstacles were observable industry-wide problems; It is spending on Amnesty International buildout. Alphabet spent more than 3 times more money in the fourth quarter on capital expenditures than analysts expected, while it expects to spend more money this year:
- Capital expenditures for the fourth quarter: $91.45 billion (est. $28.17)
- 2026 Capital Expenditure Forecast: $175 – $185 billion (estimated at $119.5 billion)
However, the results hit the target and gave investors some respite after a tough day in the markets. Alphabet stock fell just 1.6% after the market closed, a highly unusual reaction from investors with increasingly demanding expectations. Unlike other tech-related reports released Wednesday — such as Qualcomm and Arm Holdings, whose shares fell more than 9% — the search and advertising giant managed to escape mostly unscathed.
But beyond the daily coverage of the stock, we were curious to hear from the analysts who looked into the results. A few months ago, I had the opportunity to connect with Check out Managing Director of Capital Management, Chris Ballard. Chris and I had the opportunity to talk at length about Alphabet ahead of its fourth-quarter results, which were particularly strong. We’ve also briefly explored some cutting-edge bets like Waymo and Gemini.
Ballard and CCM were clearly bullish. To that end, I was curious to hear his impressions of the fourth quarter results. Here’s what he said after a recent company homework assignment:
Interview with Check out Managing Director of Capital Management, Chris Ballard
What are some of the initial reactions you have to Alphabet’s results? Where are the strong suits and weaknesses?
After months/years of being labeled a “laggard in AI,” Alphabet’s results show that it has been in a good position all along in the AI space. Its massive investments in infrastructure, which Alphabet said it will invest to the tune of about $180 billion in 2026, will make it a formidable foe to rivals for years to come.
Google Cloud is our focus in every earnings release, and it’s amazing what they delivered again this quarter. They’ve grown revenues by 48% with growing margin in this business, going from about 15% margins a year or so ago, to about 30% margins today. The cloud is really making money right now.
It’s hard to call their spending a weakness as they continue to prove that their investments are helping to grow their massive $400 billion annual revenue business at a rate of 17%, but if there is… weak The modest boast somewhere is that Alphabet is willing and able to expect spending to reach about $180 billion in 2026. At some point, that spending will slow… although when it slows, Alphabet’s profit margins will increase even more.
Alphabet is arguably in the middle of a very big business shift towards artificial intelligence products. Where can we piece together the success of this transformation so far, and at what point will this begin to meaningfully contribute to the company’s results?
Their AI products are meaningfully contributing to the company’s results today. Every part of their business depends on data, and data is what AI needs to feed on. The more Google grows its AI data feed, the faster it seems to grow. This is showing up in search, YouTube, devices, cloud, Waymo, etc. It’s unbelievable.
A lot of the results that are happening now are due to the money they spent, and because they see the results, they are able to keep spending. They increased their growth in Google search by 17% at a time when their critics hinted at the idea that “search is dead.”
There are strong indications that AI prompts users to enter more questions, which leads to searches on Google, which in turn leads to increased advertising and revenue. Google Drive is really a powerful engine.
Since November, stocks closely linked to rival OpenAI have lagged the broader market. Meanwhile, Alphabet-adjacent stocks (such as Broadcom, Celestia, Lumentum,… It was completed techniques) performed better. Now that the AI race is on, how is Google doing?‘Are current processes giving it a boost? How do they reserve it?
Google’s vertical integration is its greatest weapon. Unlike OpenAI, which relies on Microsoft for computing and… Nvidia For chips, Google has its own tensor processing units (TPUs). Using its own chips, Google can run AI models at a much lower cost per query. Furthermore, the Android/Chrome distribution means that Gemini is already in the pockets of billions, while OpenAI has to fight for every user.
The innovative alphabet dilemma still exists. It must protect its search advertising business while moving to AI answers that may reduce the number of clicks on traditional ads.
OpenAI has no legacy revenue to protect, which allows it to be more reckless. However, as I noted earlier, there is a strong case to be made that AI answers lead to search ad revenue, something that OpenAI cannot compete with at this point. CEO of Microsoft Satya Nadella He may have asked Google to dance 3 years ago, but I think he needs a break now.
There’s been a lot of talk about the recent fundraising campaign by Waymo, an Alphabet company. Which brings me to my next question: Are Alphabet’s “side bets” now more compelling as growth stories than its core search and advertising business?
Waymo no longer seems like a “target” or “another bet” for its parent company. Waymo is the world’s leading robotaxi service and covers a larger area quickly.
I don’t know if you’ve ever been on one, but it feels like a life-changing event. With 15 million rides in 2025, and soon to exceed 500,000 rides per week, Waymo’s development remains very exciting and looks poised to continue delivering amazing statistics and a better quality of life for those who ride autonomous robotaxis.
They are now active in 6 cities, with plans to expand to around 20 more cities in 2026, including internationally in London and Tokyo. They are now generating revenue of about $10 million per week and accelerating.
I think one of the big concerns right now among the mostly retail crowd is how the results are diminishing for rotation into the technology space. The past few weeks have seen a shift away from big tech companies toward value stocks and sectors with more favorable valuations. I’m wondering, what do you suppose these results mean for AI and technology companies making investments?
You seem interested in the short-term movement of stock prices in 2026, as the value of the average company within the Dow Jones Index increases and the value of the average business in the NASDAQ decreases. Google shares were up more than 6% this year before the market closed today, with shares of companies like Nvidia, Microsoft and Tesla all down a bit this year. So, not all Nasdaq stocks fell this year, nor did all Dow Jones stocks rise.
Not all AI companies will trade the same way in the short term. Putting all these competitors in the same huge basket is not the right way to think about it in our opinion. The basic details regarding these results are important. This means that how Nvidia’s business expands from here is very different from how Alphabet expands. Wall Street is likely to punish Microsoft right now over its ties to OpenAI versus Alphabet’s Gemini (Google).
We don’t like to focus on such short-term “rotations” but like to think about things 5-10 years out. We believe that the progress made by companies like Alphabet is very positive, and our lives will be better because of it. Just as we believe Berkshire Hathaway is well positioned for significant success over the same period. I mention Berkshire now because some people have near-term questions about Buffett’s retirement, and because you mentioned the possibility of a shift to “value,” which hasn’t really happened for Berkshire recently. We would like to take advantage of a near-term “rotation” away from what we are interested in and add to our stock count in such environments.
Related: Warren Buffett’s Best Investments: 5 Companies That Rewarded Him Big
