When Alphabet outlined plans on its fourth quarter earnings call Wednesday (Feb. 4) to invest between $175 billion and $185 billion in capital expenditures during 2026, the range seemed to be less about ambition than necessity.
Management framed the commitment during the call with analysts as a direct response to sustained demand for artificial intelligence (AI) compute across consumer products, enterprise platforms and cloud infrastructure.
Chief Executive Sundar Pichai told analysts that Alphabet is already operating under capacity pressure. “We’ve been supply constrained even as we’ve been ramping up our capacity,” he said, adding that the company expects to remain constrained through much of 2026 as training, inference and enterprise workloads continue to compound.
The usage metrics are rising quickly. Gemini now processes more than 10 billion tokens per minute via direct APIs, up from 7 billion last quarter. The Gemini app has surpassed 750 million monthly active users. Gemini Enterprise has already sold more than 8 million paid seats in roughly four months. Across consumer services, Alphabet reported more than 325 million paid subscriptions, while Google Cloud backlog climbed to $240 billion, up 55% sequentially.
Consolidated revenues touched $113.8 billion in the quarter, up 18% year on year.
Shares were down about 1.5% in after-hours trading.
Gemini Moves Into the Enterprise Core
Pichai emphasized that Gemini’s momentum is marked by strong enterprise demand. More than 120,000 organizations now use Gemini, and Alphabet said 95% of the top 20 software-as-a-service (SaaS) companies and over 80% of the top 100 have integrated Gemini into their products or workflows.
And in response to analyst queries about the pressures facing SaaS firms, rather than portraying AI as destabilizing software economics, Pichai described Gemini as an enabling layer.
“I definitely see we have very, very good SaaS customers who are leaders in their respective categories,” he said. “What I see the successful companies doing is they are definitely incorporating Gemini deeply in critical workflows, be it on improving their product experience and driving growth, or using it to drive efficiency within their organizations.”
From Search to Checkout: Agentic Commerce Takes Shape
A key theme during the quarter and during the call was Alphabet’s push toward agentic commerce, where AI systems progress from recommendation engines to transaction facilitators.
Pichai said 2025 focused on groundwork, including developing the universal commerce protocol with partners. The next phase integrates those capabilities directly into Gemini, AI Mode and Search. Consumers will be able to move from discovery to purchase inside conversational experiences, with new checkout flows already being introduced for select merchants.
“This is the year where you will see consumers actually being able to use all of this,” Pichai said, referring to the rollout of agentic shopping across Alphabet’s surfaces.
On the advertising side, Google Services leadership outlined early monetization efforts, including Direct Offers placed beneath AI responses and agentic tools that help advertisers generate campaigns and creative assets in real time. Advertisers used Gemini to create nearly 70 million creative assets in Q4 alone.
Search, Ads and the Enduring Core
Even with AI commanding attention, Alphabet’s traditional engines remain central to performance. Search revenue grew 17% year over year, driven by strength across retail, finance and health. AI Overviews and AI Mode are extending session length and complexity, with AI Mode queries now averaging three times longer than conventional searches and often leading to follow-up questions.
Management said Gemini-based improvements are materially increasing ad relevance while reducing irrelevant impressions. Small and mid-sized businesses are expanding budgets as automation improves return on investment, and advertisers increasingly rely on AI to assemble creatives at scale.
Google Services revenue reached $96 billion for the quarter. Google Cloud revenue rose 48% to $17.7 billion, supported by enterprise AI infrastructure and solutions.
YouTube Extends Its Reach
Video continues to operate as both growth engine and commerce surface. YouTube surpassed $60 billion in annual revenue across advertising and subscriptions. Direct-response ads drove Q4 growth, while subscription revenue advanced, particularly in YouTube Music and Premium, even as election-related comparisons weighed on brand advertising.
Executives highlighted momentum in Shorts, connected-TV formats and shoppable ad experiences, including interactive mastheads that allow viewers to browse products and send purchase links to their phones.
Apple Collaboration and the Road Ahead
Alphabet also confirmed deepening collaboration with Apple, serving as its preferred cloud provider while jointly developing next-generation foundation models based on Gemini technology. The partnership extends Alphabet’s AI footprint beyond its own devices and services.
Looking forward, executives repeatedly returned to supply constraints as the defining operational challenge. Power availability, data center construction timelines and component lead times will shape how quickly Alphabet can convert demand into deployed capacity.
Chief Financial Officer Anat Ashkenazi said roughly 60% of capital spending continued to go toward servers, with the remaining 40% directed to data centers and networking. She stressed that efficiency efforts are ongoing, from model optimization that reduced Gemini serving costs by 78% in 2025 to broader productivity initiatives across engineering and finance.
Pichai framed the moment as both opportunity and obligation. Compute capacity, he said, is what “keeps us up at night.” Alphabet’s response is to invest and integrate and treat AI as infrastructure.
