Q4 2025 Alphabet Inc Earnings Call [BACKUP]

February 4, 2026

Sundar Pichai: Its service to multiple cities across the US, and in the UK and Japan. The team has made incredible progress on important capabilities, including opening up public service to airports and freeways. In closing, 2025 was a fantastic year for the company, a big thanks to our employees and partners worldwide. We are really well positioned going into 2026. Now, over to Philipp.

Philipp Schindler: Thanks, Sundar, and hello everyone. I'll cover performance for Google Services for the quarter, then structure the rest of my remarks around the great progress we're delivering across Search, YouTube, and partnerships. Google Services revenues were $96 billion for the quarter, up 14% year-over-year, primarily driven by accelerated growth and Search, adding some further color to our results. The 17% increase in Search and Other was led by broad strength across all major verticals, with retail particularly strong. On YouTube, the 9% growth in advertising revenues was driven by direct response. Network advertising revenues were down 2% year-over-year this quarter, starting with Search and Other revenues, which delivered over $63 billion in revenue for the quarter. Sundar mentioned the expansionary moment for Search. The same is true for ads. We're investing in AI to drive significant improvements across all areas of marketing.

Philipp Schindler: Sundar mentioned the expansionary moment for Search. The same is true for ads. We're investing in AI to drive significant improvements across all areas of marketing. We're expanding the entire playing field that advertisers can compete on. AI gives businesses the ability to reach more customers in more places than ever before. Gemini uniquely positions us to bring the transformational benefits of AI to ads in three critical areas for our customers: ads quality, advertiser tools, and new AI user experiences. First, ads quality. We've been deploying Gemini models to improve query understanding at a rate of almost a launch per month for the last two years. These improvements drive better query matching, ranking, and quality, making Search ads even more effective.

Q4 2025 Alphabet Inc Earnings Call [BACKUP]

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Q4 2025 Alphabet Inc Earnings Call [BACKUP]

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Wednesday, February 4th, 2026 at 9:30 PM

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Philipp Schindler: We're expanding the entire playing field that advertisers can compete on. AI gives businesses the ability to reach more customers in more places than ever before. Gemini uniquely positions us to bring the transformational benefits of AI to ads in three critical areas for our customers: ads quality, advertiser tools, and new AI user experiences. First, ads quality. We've been deploying Gemini models to improve query understanding at a rate of almost a launch per month for the last two years. These improvements drive better query matching, ranking, and quality, making Search ads even more effective. With Gemini across our ads quality stack, we evaluate relevance with greater accuracy than with previous generations of models. This has significantly improved our ability to systematically deliver more helpful, high-quality ads, contributing to a meaningful reduction in irrelevant ads served.

Philipp Schindler: With Gemini across our ads quality stack, we evaluate relevance with greater accuracy than with previous generations of models. This has significantly improved our ability to systematically deliver more helpful, high-quality ads, contributing to a meaningful reduction in irrelevant ads served. Gemini's understanding of intent has increased our ability to deliver ads on longer, more complex searches that were previously challenging to monetize. Gemini models also have a significant impact on query understanding in non-English languages, expanding opportunities for businesses to scale globally. Second, we're building more agentic actions into our advertiser tools. Businesses can now leverage Gemini in conversational experiences within Ads and Analytics Advisor to identify and run recommended actions such as generating new campaigns.

Philipp Schindler: Gemini's understanding of intent has increased our ability to deliver ads on longer, more complex searches that were previously challenging to monetize. Gemini models also have a significant impact on query understanding in non-English languages, expanding opportunities for businesses to scale globally. Second, we're building more agentic actions into our advertiser tools. Businesses can now leverage Gemini in conversational experiences within Ads and Analytics Advisor to identify and run recommended actions such as generating new campaigns. Advertisers use Gemini as a real-time partner to assemble creatives. In Q4 alone, they used Gemini to create nearly 70 million creative assets via text customization in AI Max and PMax. For instance, Aritzia, Canada's premier fashion house used AI Max to find new high-value customers that traditional strategies miss, delivering an 80% incremental uplift in conversion value for Q4.

Philipp Schindler: Advertisers use Gemini as a real-time partner to assemble creatives. In Q4 alone, they used Gemini to create nearly 70 million creative assets via text customization in AI Max and PMax. For instance, Aritzia, Canada's premier fashion house used AI Max to find new high-value customers that traditional strategies miss, delivering an 80% incremental uplift in conversion value for Q4. L'Oréal, one of the first alpha testers, used AI Max in 2025 across 800 unique campaigns in 23 countries and 30 brands. AI Max enabled the L'Oréal group to maximize its presence across the full consumer journey, fuel its consumer growth, and increase revenue for DTC brands like NYX by 23%.

Philipp Schindler: L'Oréal, one of the first alpha testers, used AI Max in 2025 across 800 unique campaigns in 23 countries and 30 brands. AI Max enabled the L'Oréal group to maximize its presence across the full consumer journey, fuel its consumer growth, and increase revenue for DTC brands like NYX by 23%. The third area is how we monetize new AI user experiences in Search. We have significantly increased our focus on AI mode and are in the early stages of experimenting with AI mode monetization, like testing ads below the AI response, with more underway. For example, we announced direct offers in new Google Ads pilot, which will allow advertisers to show exclusive offers for shoppers who are ready to buy directly in AI mode. This new type of sponsored content uses AI to match the right offer provided by the retailer to the right user.

Philipp Schindler: The third area is how we monetize new AI user experiences in Search. We have significantly increased our focus on AI mode and are in the early stages of experimenting with AI mode monetization, like testing ads below the AI response, with more underway. For example, we announced direct offers in new Google Ads pilot, which will allow advertisers to show exclusive offers for shoppers who are ready to buy directly in AI mode. This new type of sponsored content uses AI to match the right offer provided by the retailer to the right user.

Philipp Schindler: As Sundar mentioned, we are building the era of agentic commerce and working with our partners to introduce the Universal Commerce Protocol in our consumer products and across the web. We've received tremendous feedback from the industry. Soon, people can use a new checkout experience to buy directly in AI mode and Gemini from select merchants. Turning now to YouTube, which remains the number one streamer in the US for nearly three years, according to Nielsen. YouTube creators are providing an unmatched breadth of content. Our investment in AI innovation across creativity, viewing experience, and monetization continues to pay off. We're seeing strong traction in our subscription business. We are innovating to meet consumers where they are. We added a new sports tier for YouTube TV at a lower price point. YouTube Premium Lite is proving to be a popular choice.

Philipp Schindler: We continue to deliver strong year-on-year growth across YouTube subscriptions, particularly YouTube Music and Premium. Looking at monetization across YouTube, momentum continues in Shorts and the living room. Shorts now averages over 200 billion daily views. As we've shared before, in a number of countries, Shorts earns more revenue per watch hour than traditional in-stream on YouTube, including the US. The retail vertical continues to grow, fueled by smaller advertisers increasingly adopting Demand Gen. Likewise, direct response continues to benefit from the momentum we're seeing with small and medium-sized advertisers. Viewers trust product and brand recommendations from YouTube creators, and we're focused on making YouTube a premier shopping destination. Innovations like shoppable ad formats are improving advertiser return on investment. During Cyber 5, advertisers piloted shoppable mastheads, a new interactive ad format where viewers browse products and send links to their phones for an easy shopping experience.

Philipp Schindler: During Cyber 5, advertisers piloted shoppable mastheads, a new interactive ad format where viewers browse products and send links to their phones for an easy shopping experience. On brands, our Creator Partnership Hub makes it easier for brands to find creators and develop campaigns. This holiday season, brands like JCPenney, Old Navy, and Target worked with creators for their holiday campaigns. Mattel partnered with eight top YouTube creators to reach families during the peak holiday shopping season in a campaign that helped drive a 25% increase in search volume for Uno. As always, I wrap with the progress we're seeing across partnerships, where customers tap into the strength and breadth of Google's products to accelerate their transformation.

Philipp Schindler: On brands, our Creator Partnership Hub makes it easier for brands to find creators and develop campaigns. This holiday season, brands like JCPenney, Old Navy, and Target worked with creators for their holiday campaigns. Mattel partnered with eight top YouTube creators to reach families during the peak holiday shopping season in a campaign that helped drive a 25% increase in search volume for Uno. As always, I wrap with the progress we're seeing across partnerships, where customers tap into the strength and breadth of Google's products to accelerate their transformation. I would start by joining Sundar in saying how pleased I am that we are collaborating with Apple as their preferred cloud provider and to develop the next generation of Apple Foundation models based on Gemini technology.

Philipp Schindler: I would start by joining Sundar in saying how pleased I am that we are collaborating with Apple as their preferred cloud provider and to develop the next generation of Apple Foundation models based on Gemini technology. We partnered with Reliance Jio to provide over 500 million consumers with an 18-month free trial of our Gemini suite of products at 2 TB of cloud storage. Reliance Enterprise customers will also get access to Google Cloud's Gemini Enterprise and TPUs, bringing the best of Google AI to every employee and workflow.

Philipp Schindler: We partnered with Reliance Jio to provide over 500 million consumers with an 18-month free trial of our Gemini suite of products at 2 TB of cloud storage. Reliance Enterprise customers will also get access to Google Cloud's Gemini Enterprise and TPUs, bringing the best of Google AI to every employee and workflow. The Home Depot is applying Google AI across the board, from cloud tools to AI-powered ads and YouTube Creator Partnerships that connect with the next generation of DIYers. Their investments in PMax and YouTube Creator Partnerships have resulted in a double-digit increase in ad clicks and visits. In closing, I'd like to thank Googlers everywhere for their contributions to our success and, as always, to our customers and partners for their continued trust. Anat, over to you.

Philipp Schindler: The Home Depot is applying Google AI across the board, from cloud tools to AI-powered ads and YouTube Creator Partnerships that connect with the next generation of DIYers. Their investments in PMax and YouTube Creator Partnerships have resulted in a double-digit increase in ad clicks and visits. In closing, I'd like to thank Googlers everywhere for their contributions to our success and, as always, to our customers and partners for their continued trust. Anat, over to you.

Anat Ashkenazi: Thank you, Philipp. My comments will focus on year-over-year comparisons for the fourth quarter, unless I state otherwise. I will start with results at the Alphabet level and will then cover our segment results. I'll end with some commentary on our outlook for the first quarter and full year 2026. 2025 was a strong year of innovation and execution for Alphabet. These efforts, combined with our investments in AI, drove meaningful results across the business. For the full year 2025, Alphabet consolidated revenues were $403 billion, up 15% on a reported and constant currency basis. Moving to Q4 performance, we deliver strong growth in the fourth quarter. Consolidated revenues reached $113.8 billion, up 18% or 17% in constant currency, and was driven by an acceleration in Search and cloud revenues.

Anat Ashkenazi: Turning to costs and expenses, we reported a $2.1 billion stock-based compensation charge due to an increase in Waymo's valuation related to the investment round that was announced on Monday. The vast majority of the charge was reflected in R&D expenses. Total cost of revenue was $45.8 billion, up 13%. Tech was $16.6 billion, up 12%. Other cost of revenues was $29.2 billion, up 13%, with the increase primarily driven by depreciation associated with the deployment of our technical infrastructure, content acquisition costs largely for YouTube, and other technical infrastructure operations costs. Total operating expenses were up 29% to $32.1 billion. R&D expense increased by 42%, driven by compensation and depreciation. The increase in compensation was due to the Waymo charge and an investment in AI talent. Sales and marketing expenses were up 12%, primarily driven by marketing investments to support the Gemini app and Search.

Anat Ashkenazi: Sales and marketing expenses were up 12%, primarily driven by marketing investments to support the Gemini app and Search. G&A expenses increased 21%, primarily due to a shift in timing of our charitable contributions. Operating income increased 16% to $35.9 billion, and operating margin was 31.6%. Both operating income and operating margin were negatively impacted by the $2.1 billion Waymo charge in the quarter. Other income and expenses were $3.2 billion, primarily due to unrealized gains in our non-marketable equity securities portfolio. Net income increased 30% to $34.5 billion, and earnings per share increased 31% to $2.82. We generated record operating cash flow of $52.4 billion in the fourth quarter and $164.7 billion for the full year. This translated into $24.6 billion of free cash flow in the fourth quarter and $73.3 billion for the full year.

Anat Ashkenazi: G&A expenses increased 21%, primarily due to a shift in timing of our charitable contributions. Operating income increased 16% to $35.9 billion, and operating margin was 31.6%. Both operating income and operating margin were negatively impacted by the $2.1 billion Waymo charge in the quarter. Other income and expenses were $3.2 billion, primarily due to unrealized gains in our non-marketable equity securities portfolio. Net income increased 30% to $34.5 billion, and earnings per share increased 31% to $2.82. We generated record operating cash flow of $52.4 billion in the fourth quarter and $164.7 billion for the full year. This translated into $24.6 billion of free cash flow in the fourth quarter and $73.3 billion for the full year. We ended the quarter with $126.8 billion in cash and marketable securities and $46.5 billion in long-term debt.

Anat Ashkenazi: We ended the quarter with $126.8 billion in cash and marketable securities and $46.5 billion in long-term debt. Turning to segment results, Google Services revenues increased 14% to $95.9 billion, reflecting strong growth in Search and subscriptions. Google Search and other advertising revenues increased by 17% to $63.1 billion, representing another strong quarter with continued growth across all major verticals, with the largest contribution from retail. YouTube advertising revenues increased 9% to $11.4 billion, driven by direct response advertising. Results were negatively affected from the lapping of the strong spend on US election in Q4 2024 that we've mentioned on previous earnings calls. Network advertising revenues of $7.8 billion were down 2%.

Anat Ashkenazi: Turning to segment results, Google Services revenues increased 14% to $95.9 billion, reflecting strong growth in Search and subscriptions. Google Search and other advertising revenues increased by 17% to $63.1 billion, representing another strong quarter with continued growth across all major verticals, with the largest contribution from retail. YouTube advertising revenues increased 9% to $11.4 billion, driven by direct response advertising. Results were negatively affected from the lapping of the strong spend on US election in Q4 2024 that we've mentioned on previous earnings calls. Network advertising revenues of $7.8 billion were down 2%. Subscription platforms and devices revenues increased 17% this quarter to $13.6 billion due to strong growth in YouTube subscriptions, particularly YouTube Music, and Premium, and growth in Google One, which benefited from increased demand for AI plans. Google Services operating income increased 22% to $40.1 billion, and operating margin was 41.9%.

Anat Ashkenazi: Subscription platforms and devices revenues increased 17% this quarter to $13.6 billion due to strong growth in YouTube subscriptions, particularly YouTube Music, and Premium, and growth in Google One, which benefited from increased demand for AI plans. Google Services operating income increased 22% to $40.1 billion, and operating margin was 41.9%. The Google Cloud segment delivered outstanding results in Q4 as the business continued to benefit from strong demand for our enterprise AI products. Cloud revenue accelerated meaningfully and were up 48% to $17.7 billion. Revenues were driven by strong performance in GCP, which continued to grow at a rate that was much higher than cloud's overall revenue growth rate.

Anat Ashkenazi: The Google Cloud segment delivered outstanding results in Q4 as the business continued to benefit from strong demand for our enterprise AI products. Cloud revenue accelerated meaningfully and were up 48% to $17.7 billion. Revenues were driven by strong performance in GCP, which continued to grow at a rate that was much higher than cloud's overall revenue growth rate. As Sundar noted, we're driving performance through strong growth in the win rate of new customers, signing larger customer commitments, and increasing spend with existing customers. GCP's performance was driven by accelerating growth in enterprise AI products, which are generating billions in quarterly revenues. We had strong growth in both enterprise AI infrastructure driven by deployment of TPUs and GPUs and enterprise AI solutions, which benefited from demand for our industry-leading models, including Gemini 3.

Anat Ashkenazi: As Sundar noted, we're driving performance through strong growth in the win rate of new customers, signing larger customer commitments, and increasing spend with existing customers. GCP's performance was driven by accelerating growth in enterprise AI products, which are generating billions in quarterly revenues. We had strong growth in both enterprise AI infrastructure driven by deployment of TPUs and GPUs and enterprise AI solutions, which benefited from demand for our industry-leading models, including Gemini 3.

Anat Ashkenazi: Core GCP was also a meaningful contributor to growth due to strong demand for infrastructure and other services such as cybersecurity and data analytics. We also had double-digit growth in workspace, driven by an increase in average revenue per seats and the number of seats. Cloud operating income was $5.3 billion, more than doubling year-over-year. Operating margin increased from 17.5% in the fourth quarter of last year to 30.1%. Google Cloud's backlog increased 55% sequentially and more than doubled year-over-year, reaching $240 billion at the end of the fourth quarter. The increase in backlog was driven by strong demand for our cloud products, led by our enterprise AI offerings from multiple customers. In other bets, revenues were $370 million, and operating loss was $3.6 billion, reflecting the $2.1 billion Waymo charge I mentioned earlier.

Anat Ashkenazi: We allocate resources in other bets to businesses like Waymo, where we see meaningful opportunities to create value. Alphabet funded a significant portion of the $16 billion investment round that Waymo announced on Monday, which will allow the business to accelerate its global expansion. CapEx was $27.9 billion for the fourth quarter and $91.4 billion for the full year, in line with our expectation. The vast majority of our CapEx was invested in technical infrastructure, with approximately 60% of that investment in servers and 40% in data centers and networking equipment. In Q4, we returned capital to shareholders through $5.5 billion of share repurchase and $2.5 billion of dividend payments. Turning to our outlook, I would like to provide some commentaries on factors that will impact our business performance in the first quarter and full year 2026.

Anat Ashkenazi: First, in terms of revenues, we're pleased with the overall momentum of the business. At current spot rates, we would expect to see an FX tailwind to our consolidated revenues in Q1. However, the volatility in exchange rates could affect the impact of FX on Q1 revenues. In Google Services, we expect growth to be driven by ongoing innovation in the user experience, as well as improved ROI for advertisers, keeping in mind the normal seasonal pattern for advertising revenue. In Google Cloud, we're seeing significant demand for products and services, which we expect to continue to drive strong growth despite the tight supply environment we're operating in. Moving to investments, the investment we have been making in AI is already translating into strong performance across the business, as you've seen in our financial results.

In closing, 2025 was a fantastic year for the company. A big thanks to our employees and partners worldwide. We are really well positioned going into 2026. Now, over to Philipp.

Thanks Andor and hello everyone. I'll cover performance for Google services for the quarter, then structure, the rest of my remarks around the great progress. We're delivering across search YouTube and Partnerships.

Google services. Revenues were 96 billion for the quarter up 14% year-on-year, primarily driven by accelerated growth and search.

Adding some further color to our results, the 17% increase in Search and other was led by broad strength across all, major, verticals with retail, particularly strong.

On YouTube, the 9% growth in advertising revenues, was driven by direct response.

Network advertising revenues were down 2% year-on-year this quarter.

Anat Ashkenazi: Our successful execution, coupled with strong performance, reinforces our conviction to make the investments required to further capitalize on the AI opportunity. For the full year 2026, we expect CapEx to be in the range of $175 billion to $185 billion, with investments ramping over the course of the year. We're investing in AI compute capacity to support frontier model development by Google DeepMind, ongoing efforts to improve the user experience and drive higher advertiser ROI in Google Services, significant cloud customer demand, as well as strategic investments in other bets. Keep in mind that the availability of supply, pricing of components, and timing of cash payments can cause some variability in the reported CapEx number.

Starting with search and other revenues, which delivered over 63 billion in revenue for the quarter.

Sunda mentioned the expansionary moment for search. The same is true for ads. We're investing in AI to drive significant improvements, across all areas of marketing, we're expanding the entire playing field at advertisers can compete on. AI gives businesses, the ability to reach more customers in more places than ever before.

Gemini uniquely positions us to bring the transformational benefits of AI to ads and three critical areas. For our customers: ads quality, advertiser tools, and new AI user experience. First, at quality. We've been deploying Gemini models to improve query understanding at a rate of almost a launch per month for the last two years. These improvements drive better query matching, ranking, and quality, making search ads even more effective.

Anat Ashkenazi: In terms of expenses, as we've discussed on previous calls, the significant increase in our investments in technical infrastructure will continue to put pressure on the P&L in the form of higher depreciation expense and related data centers' operations costs, such as energy. In 2025, depreciation increased by nearly $6 billion, or 38%, from $15.3 billion in 2024 to $21.1 billion in 2025. Given the increase in our CapEx investments in recent years, we expect the growth rate in 2026 depreciation to accelerate in Q1 and meaningfully increase for the full year. We're also planning to continue hiring in key investment areas, such as AI and cloud. In 2025, our teams delivered amazing innovation, executing with a high level of discipline and velocity. These efforts provided great experiences for consumers and outstanding performance for creators, partners, and enterprise customers, driving strong revenue growth.

What Gemini across our ads quality stack, we evaluate relevance with greater accuracy than with previous generations of models. This has significantly improved, our ability to systematically deliver. More helpful high-quality ads contributing to a meaningful reduction in irrelevant ads. Served

Gemini's understanding of intent has increased our ability to deliver ads on longer, more complex searches that were previously challenging to monetize.

Gemini models. Also have a significant impact on Corey understanding in non-english languages expanding opportunities for businesses to scale globally.

Anat Ashkenazi: We're also planning to continue hiring in key investment areas, such as AI and cloud. In 2025, our teams delivered amazing innovation, executing with a high level of discipline and velocity. These efforts provided great experiences for consumers and outstanding performance for creators, partners, and enterprise customers, driving strong revenue growth.I want to take this opportunity to thank our employees for their contribution to this impressive performance. Now, Sundar, Philipp, and I will take your questions.

Second, we're building more, agentic actions, into our Advertiser tools. Businesses can now leverage Gemini in conversational experiences within ads and analytics, advisor to identify and run recommended actions such as generating new campaigns.

Advertisers use Gemini is a real-time partner to assemble. Creatives in Q4 alone, they use Gemini to create nearly 70 million, creative assets, via text customization and AI, Max and Pax.

Anat Ashkenazi: I want to take this opportunity to thank our employees for their contribution to this impressive performance. Now, Sundar, Philipp, and I will take your questions.

For instance, aritzia, can address Premier fashion. How is used AI Max to find new high value. Customers that traditional strategies, Miss delivering in an 80% incremental uplift in conversion value for Q4.

Operator: Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To prevent any background noise, we ask that you please mute your line once your question has been stated. And your first question comes from Brian Nowak with Morgan Stanley. Your line is now open.

L'Oreal 1 of the first Alpha testers, use a IMAX in 2025 across 800 unique campaigns and 23 countries and 30 brands.

A IMAX enabled, the L'Oreal group to maximize its price. The full consumer Journey, fuel, its consumer growth and increase revenue for DTC Brands, like mix by 23%.

[Analyst] (Morgan Stanley): Thanks for taking my questions. I have two, one on Agentic, one on YouTube. The first one on Agentic, Sundar, I'd be curious to hear about, as you look back at 2025, where do you think you made the most progress on new types of Agentic commerce products? And then looking into 2026, where are you most optimistic to sort of have even more progress in utility for users and your advertisers? And the second one is on YouTube. We've seen a lot of the new content creation models like Genie, et cetera. Walk us through sort of the Alphabet long-term vision for how Genie and some of these content creation tools could be integrated into YouTube over time.

Brian Nowak: Thanks for taking my questions. I have two, one on Agentic, one on YouTube. The first one on Agentic, Sundar, I'd be curious to hear about, as you look back at 2025, where do you think you made the most progress on new types of Agentic commerce products? And then looking into 2026, where are you most optimistic to sort of have even more progress in utility for users and your advertisers? And the second one is on YouTube. We've seen a lot of the new content creation models like Genie, et cetera. Walk us through sort of the Alphabet long-term vision for how Genie and some of these content creation tools could be integrated into YouTube over time.

The third area is how we monetize new AI user experiences in search.

We have significantly increased our focus on AI mode and are in the early stages of experimenting. With AI mode, monetization like testing ads below the air response with more underway.

For example, we know it's direct offers a new Google ads pilot, which will allow advertisers to show exclusive offers for Shoppers who are ready to buy directly in AI mode. This new type of sponsored content uses AI to match the right offer provided by the retailer to the right user.

Sundar Pichai: Great. Thanks. Thanks, Brian. First, maybe I'll take the Agentic part first. I definitely think 2025 was more about laying the foundation, getting the models to start being more robust in Agentic use cases. And obviously, coding is an area where the progress was the most felt. In areas like commerce, I think we spent the year working with the ecosystem to develop the underlying protocol that's going to be needed for this Agentic world. So I think the launch of Universal Commerce Protocol at NRF in January with a bunch of founding partners, I think, has been super well received. So I'm excited now that we've laid the foundation of interoperability on which Agentic commerce can work. And now we are integrating those experiences into Gemini AI mode and so on.

As Sundar mentioned, we are building the era of agenda, Commerce and working with our partners to introduce the universal Commerce protocol in our consumer products and across the web.

We've received tremendous feedback from the industry soon. People can use a new checkout experience to buy directly in AI mode and Gemini from select merchants.

turning now to YouTube which Remains the number 1 streamer in the US for nearly 3 years according to Nielsen

YouTube creators are providing an unmatched breadth of content. Our investment in AI innovation across creativity, viewing experience, and monetization continues to pay off.

Subscriptions, particularly YouTube Music and Premium.

Looking at monetization across YouTube, momentum continues in Shorts in the living room.

Sundar Pichai: So I think this is the year where you will see consumers actually being able to use all of this. And I'm excited about the opportunity ahead. On YouTube, look, super excited by Genie and blown away by spent a lot of time creating these incredible worlds. I think it's going to have a wide level of applicability. I think an area where we shine in general is multimodality and representing the real world. And I think Genie is a further step in that direction in terms of building world models. All the innovation we are doing, be it our Imagen, Veo, Lyria, Genie, all that work we bring in into our products and to our cloud customers. And YouTube is going to be a natural place for creators. We are going to keep incorporating these tools. Already, creators are responding by adopting these.

Sundar Pichai: And I'm excited about the opportunity ahead. On YouTube, look, super excited by Genie and blown away by spent a lot of time creating these incredible worlds. I think it's going to have a wide level of applicability. I think an area where we shine in general is multimodality and representing the real world. And I think Genie is a further step in that direction in terms of building world models. All the innovation we are doing, be it our Imagen, Veo, Lyria, Genie, all that work we bring in into our products and to our cloud customers. And YouTube is going to be a natural place for creators. We are going to keep incorporating these tools. Already, creators are responding by adopting these. But we do want to put creators at the center of the experience. That's very, very important to us. So, for us, making sure YouTube is a voice for creator expression is the foundation by which we will approach this.

Shorts. Now, averages over 200 billion daily views. And as we've shared before, in a number of countries shorts earns more Revenue per watch, our than traditional instream on YouTube, including the US

The retail vertical continues to grow, fueled by smaller advertisers increasingly adopting demand and

Likewise, direct response continues to benefit from the momentum we're seeing with small and medium-sized advertisers.

Viewers trust product, and brand recommendations from YouTube creators, and we're focused on making YouTube a premier shopping destination.

Innovations, like shoppable ad formats, are improving advertiser return on investment.

During cyber 5, advertisers piloted shoppable, Mast heads in new interactive ad format, their viewers browse products and send links to their phones for an easy shopping experience.

On Brands our creator partnership helped. Makes it easier for Brands to find creators and develop campaigns this holiday season Brands, like JC Penney Old Navy and Target work with creators for their holiday campaigns.

Sundar Pichai: But we do want to put creators at the center of the experience. That's very, very important to us. So, for us, making sure YouTube is a voice for creator expression is the foundation by which we will approach this.

Mattel partnered with a top YouTube creator to reach families during the peak holiday shopping season in a campaign that helped drive a 25% increase in search volume for Uno.

[Analyst] (Morgan Stanley): Great. Thanks, Sundar.

Brian Nowak: Great. Thanks, Sundar.

As always, I wrap with the progress we're seeing across Partnerships, where customers tap into the strength and breadth of Google's products to accelerate their transformation.

Operator: Your next question comes from Eric Sheridan with Goldman Sachs. Your line is now open.

[Analyst] (Goldman Sachs): Thanks so much for taking the question. Two, if I could. Over the last couple of earnings calls, we've talked a lot about imbalances between demand and capacity for AI, both internally and externally. With the step function change in absolute capital dollars you're projecting now in 2026, can you talk about the pathway to closing the gaps for the need for compute, both internally and externally, and how to think about some of the outputs of closing that gap as the year progresses? And again, the second part would be against that level of spend that you're now projecting for 2026, how do you think about continuing to find operating efficiencies inside the business to fund those growth investments as well? Thank you.

Eric Sheridan: Thanks so much for taking the question. Two, if I could. Over the last couple of earnings calls, we've talked a lot about imbalances between demand and capacity for AI, both internally and externally. With the step function change in absolute capital dollars you're projecting now in 2026, can you talk about the pathway to closing the gaps for the need for compute, both internally and externally, and how to think about some of the outputs of closing that gap as the year progresses? And again, the second part would be against that level of spend that you're now projecting for 2026, how do you think about continuing to find operating efficiencies inside the business to fund those growth investments as well? Thank you.

I would start by joining Sundar and saying how pleased I am that we are collaborating with apple as their preferred cloud provider and to develop the next generation of Apple Foundation models. Based on Gemini technology, we partner with Reliance jio to provide over 500 million consumers with an 18-month free trial of our Gemini Suite of products, and 2 terabyte of cloud storage.

Reliance Enterprise customers will also get access to Google Cloud's Gemini, Enterprise and tpus. Bringing the best of Google AI to every employee and workflow.

The Home Depot is applying Google AI across the board from cloud tools, to AI powered ads, and YouTube Creator Partnerships that connect with the next generation of Duos their investments in PAX and YouTube Creator. Partnerships have resulted in double-digit increase in ad clicks and visits.

Sundar Pichai: Thanks, Eric. You are right. And we've been supply constrained, even as we've been ramping up our capacity. Obviously, our CapEx spend this year is an eye towards the future. And you have to keep in mind some of the time horizons are increasing in the supply chain, et cetera. So we are constantly planning for the long term and working towards that. And obviously, how we close the gap this year is a function of what we have done in the prior years, right? And so there is that time delay to keep in mind. I expect the demand we are seeing across the board, across our services, what we need to invest for future work for Google DeepMind, as well as for cloud, I think is exceptionally strong. And so I do expect to go through the year in a supply constrained way.

In closing, I'd like to thank Googlers everywhere for their contributions to our success and, as always, to our customers and partners for their continued trust. And now over to you.

Thank You, Phillip my comments will focus on year-over-year comparisons for the fourth quarter unless I State. Otherwise

I will start with results at the Alphabet level and will then cover our segment results.

I'll end with some commentary in our outlook for the first quarter and full year 2026.

2025 was a strong year of innovation and execution for Alphabet.

These efforts, combined with our investments in AI, drove meaningful results across the business.

For the full year, 2025 alphabet Consolidated revenues were 403 billion dollars up. 15% on a reported and constant currency basis.

Moving to Q4 performance. We deliver strong growth in the fourth quarter.

Consolidated revenues reached $113.8 billion, up 18%, or 17% in constant currency, and was driven by an acceleration in Search and Cloud revenues.

Sundar Pichai: Maybe Anat Ashkenazi on the second part.

Anat Ashkenazi: Sure. Thanks, Eric, for the question. I've mentioned on one of the previous earnings calls our approach to how we look at efficiency and productivity. We don't view this as an episodic, one-time project or effort, but rather how we run the business on a regular basis and always seek additional opportunities to drive efficiency across the business. Certainly, with the demand we're seeing, whether it's from external customers or across the organization, the more capital we can free up within the organization to invest, the better we can turn this flywheel of making investments to drive future growth. We're doing this across the organization, whether it's within our technical infrastructure. Certainly, when we invest at these amounts, we look at how we can ensure that we are the most efficient with every dollar that goes towards our technical infrastructure.

Turning to costs and expenses, we reported a 2.1 billion dollar, stock-based compensation, charge due to an increase in whom, most valuation related to the investment round was announced on Monday.

The vast majority of the charge was reflected in R&D expenses.

Total cost of Revenue was 45.8 billion up 13%.

Tech was 16.6 billion up 12%.

Other cost of revenues was $29.2 billion, up 13%, with the increase primarily driven by depreciation associated with a deployment of our technical infrastructure, content acquisition cost largely for YouTube, and other technical infrastructure operations cost.

Total operating expenses were up 29% to $32.1 billion.

Anat Ashkenazi: There are scientific innovations that are part of that process. Technical innovation, as you know and we've mentioned before, we primarily focus on construction of our own data centers. We do partner with some external parties on lease on occasion. But most of our data center, we construct ourselves. And we ensure that we do it in the most efficient way, in a way that matches our workloads and our needs. We look at coding productivity that Sundar mentioned in the past. About 50% of our codes are written by agents, coding agents, which are then reviewed by our own engineers. But certainly, it helps our engineers do more, move faster with the current footprint. We look at how we run the business across the organization.

R&D expense increased by 42%, driven by compensation and depreciation. The increase in compensation was due to the way Mo charged and investment in AI talent.

Sales and marketing expenses were up 12%, primarily driven by marketing investments to support the Gemini app and Search.

And G&A expenses increased 21%, primarily due to a shift in timing of our charitable contributions.

Operating income increased 16% to $35.9 billion, and operating margin was 31.6%.

And our way more charge in the quarter.

Other income and expenses was 3.2 billion, primarily due to unrealized gains and our non-marketable Equity Securities portfolio.

Anat Ashkenazi: So, using AI within the business to drive daily operations, it can be all the way from the engineering team to small teams within our back office. Even within my finance team, for example, we deployed agents within our treasury organization. We're deploying agents within how we pay and reconcile invoice, et cetera. So there are opportunities across the business that we evaluate on a regular basis to ensure we can free up more of that capacity to invest in our future.

Net income increased 30% to 34.5 billion dollars and earnings per share increased 31% to $2.82.

We generated record operating cash flow of 52.4 billion in the fourth quarter and 164.7 billion for the full year.

This translated into 24.6 billion dollars of free cash flow in the fourth quarter and 73.3 billion for the full year.

Operator: Your next question comes from Doug Anmuth with JPMorgan. Your line is now open.

[Analyst] (Morgan Stanley): Thanks for taking questions. I have two. Over the last couple of years, we've seen considerable large language model leapfrogging. And many expect that to continue. What are the ways that Google can build and maintain its Gemini position around data and distribution and product integration? And then how should we think about the potential for TPUs to move outside of Google Cloud and into external data centers and develop as an incremental revenue stream? Thank you.

Doug Anmuth: Thanks for taking questions. I have two. Over the last couple of years, we've seen considerable large language model leapfrogging. And many expect that to continue. What are the ways that Google can build and maintain its Gemini position around data and distribution and product integration? And then how should we think about the potential for TPUs to move outside of Google Cloud and into external data centers and develop as an incremental revenue stream? Thank you.

We ended the quarter with 126.8 billion in cash and marketable securities and 46.5 billion in long-term debt. Turning to segment results, Google services revenues increase 14% to 95.9 billion, reflecting strong growth in Search and subscriptions.

Google search and other advertising revenues increased by 17% to 63.1 billion representing another strong quarter with continued growth across all major verticals with the largest contribution from retail.

YouTube advertising revenues increased 9% to 11.4 billion driven by direct response advertising.

Sundar Pichai: Doug, look, I think the LLM frontier; it's been an exciting trajectory. I think 2026 will continue to show that progress. We are obviously improving these models across many paradigms, right, on pre-training, post-training, test-time compute, and so on. We are bringing multimodal models into the picture. We are bringing Agentic capabilities, the coding area showing a lot of progress, and obviously integrating all of this together and offering a great customer experience through our products as well as through our APIs to our cloud customers. To me, it feels like there's a lot of headroom ahead. As you've seen our trajectory over the past two years in terms of how we have been making progress, I think we are in a very, very relentless innovation cadence. I think we are confident about maintaining that momentum as we go through 2026.

Results for negatively affected from the lapping of the strong, spend on us election. The fourth core of 2024 that we've mentioned on previous earnings calls,

Network advertising revenues of 7.8 billion were down 2%.

Subscription platforms and devices, revenues increased 17% this quarter to 13.6 billion due to strong growth in YouTube subscriptions, particularly YouTube music and premium and growth in Google 1. Which benefited from increased demand for AI plans.

Google Services operating income increased 22% to $40.1 billion, and operating margin was 41.9%.

The Google Cloud segment, delivered outstanding results in the fourth quarter, as the business continued to benefit from strong demand for Enterprise AI products.

Cloud revenue accelerated meaningfully and was up 48% to $17.7 billion.

Revenues were driven by strong performance in gcp, which continued to grow at a rate that was much higher than Cloud's overall Revenue growth rate.

Sundar Pichai: In terms of TPUs, I would think about it as it's reflected in our overall part of what makes Google Cloud an attractive choice, is the wide choice of accelerators we bring to bear here. We meet customers in terms of what their needs are and the choice, as well as other things we bring as part of Google Cloud, the end-to-end efficiencies in our data centers. All of that comes to bear. That's what you see in the strong momentum in Google Cloud. Given the overall investment we are making, we expect to be able to drive that momentum there. So that's how I would think about it.

As sooner noted, we're driving performance through strong growth in the win rate of new customer sign-ins, larger customer commitments, and increasing spend with existing customers.

GCP's performance was driven by accelerating growth in Enterprise AI products, which are generating billions in quarterly revenues.

We had strong growth in both Enterprise via infrastructure driven by deployment of tpus and gpus and Enterprise AI Solutions which benefited from demand for industry-leading models including Gemini 3.

Core gcp was also a meaningful contributor to growth due to strong demand for infrastructure and other services such as cyber security and data analytics.

We also had double digit growth in workspace, driven by an increase in average revenue per seats and the number of seats.

[Analyst] (Morgan Stanley): Thank you, Sundar.

Doug Anmuth: Thank you, Sundar.

Operator: Your next question comes from Mark Mahaney with Evercore. Your line is now open.

[Analyst] (Morgan Stanley): Thanks. Two questions. One, could you just comment a little bit on the YouTube ad revenue, that 9% year-over-year growth? It sounded like direct response was good. And it sounded like, from search, that retail came in relatively strong. So it's a little surprising that didn't kind of come through in the YouTube ads revenue growth. And then, Sundar, can I ask you to try to get ahead of a debate in the market, which is we're kind of maybe at a DeepSeek moment again? You talked earlier about Gemini being the AI engine for some of the most successful software SaaS companies out there in the world. And it just seems like there's a market belief that these software companies are kind of losing seat power, losing pricing power. And it looks like it'd be a really terrible customer base. I can't imagine that that's actually going to happen.

Mark Mahaney: Thanks. Two questions. One, could you just comment a little bit on the YouTube ad revenue, that 9% year-over-year growth? It sounded like direct response was good. And it sounded like, from search, that retail came in relatively strong. So it's a little surprising that didn't kind of come through in the YouTube ads revenue growth. And then, Sundar, can I ask you to try to get ahead of a debate in the market, which is we're kind of maybe at a DeepSeek moment again?

Cloud operating income was 5.3 billion more than doubling year-over-year and operating margin increased from 17.5% in the fourth quarter of last year to 30.1%.

Google Cloud's backlog, increased 55% sequentially and more than doubled year-over-year. Reaching 240 billion dollars. At the end of the fourth quarter.

The increase in backlog was driven by strong demand for our Cloud products, led by our Enterprise AI offerings from multiple customers.

Mark Mahaney: You talked earlier about Gemini being the AI engine for some of the most successful software SaaS companies out there in the world. And it just seems like there's a market belief that these software companies are kind of losing seat power, losing pricing power. And it looks like it'd be a really terrible customer base. I can't imagine that that's actually going to happen.But could you just talk about it? You're at the forefront of AI. And the impact that that's having on software companies, why wouldn't that be, or why would it be, undermining the economics of your large software SaaS company base? Thanks.

In other bets revenues were 370 million and operating loss was 3.6 billion. Reflecting the 2.1 billion whmo charge I mentioned earlier

We allocate resources in other bets to businesses, like, quimo, where we see meaningful opportunities to create value.

[Analyst] (Morgan Stanley): But could you just talk about it? You're at the forefront of AI. And the impact that that's having on software companies, why wouldn't that be, or why would it be, undermining the economics of your large software SaaS company base? Thanks.

Alphabet funded a significant portion of the 16 billion investment round that way more Nelson 1 day, which will allow the business to accelerate its Global expansion.

Philipp Schindler: So Mark, so first of all, thank you for the question. For the full year 2025, our YouTube's annual revenue surpassed $60 billion across ads and subscription. In Q4, YouTube ads was driven, indeed, by strong growth and direct response. On the brand side, as Anat shared, the largest factor negatively impacting the year-over-year growth rate was lapping the strong spend on US elections. We also saw a slight impact in some other brand-related verticals. But taking a step back, I think it's important to think about YouTube ads and subs holistically. Because when a user shifts from being an ad-supported user to a YouTube Music and Premium customer, it has a slightly negative impact on YouTube ads revenues, but a positive impact on our business. And we had strong revenue growth in YouTube subscriptions this quarter, particularly in the YouTube Music and Premium category.

Capex was 27.9 billion for the fourth quarter and 91.4 billion for the full year in line with our expectation.

The vast majority of our CapEx was invested in technical infrastructure, with 60% of that investment in servers and 40% in data centers and networking equipment.

In Q4, we returned capital to shareholders through $5.5 billion of share repurchases and $2.5 billion of dividend payments.

Outlook. I would like to provide some commentaries on factors that will impact our business performance in the first quarter and full year 2026.

Philipp Schindler: Maybe the interesting part is what we're actually excited about, our roadmap and brand, the opportunity on connected TVs, more innovative ad formats. For example, the shoppable mastheads I spoke about earlier that we piloted during Cyber 5. We're working really, really hard to further connect brands and creators, scaling sponsorships, enabling advertisers to showcase their products, their services during high-visibility Spotlight Moments. We continue to expand the functionality of the Creator Partnership Hub, making it a lot easier for brands to actually find creators and develop campaigns. We're heavily focusing on brand deals, on measurement efforts. So there's a lot of interesting work in the pipeline. And on top of that, we actually see opportunity also for upside with performance advertising. There's a lot of momentum with Demand Gen adoption across small and medium advertisers.

First, in terms of revenues, we're pleased with the overall momentum of the business. At current spot rates, we would expect to see an FX tailwind to our consolidated revenues in Q1. However, the volatility in exchange rates could affect the impact of FX on Q1 revenues. In Google Services, we expect growth to be driven by ongoing innovation in the user experience, as well as improved ROI for advertisers, keeping in mind the normal seasonal pattern for advertising revenue.

In Google Cloud. We're seeing significant demand for our products and services which we expect and continue to drive strong growth. Despite the tight Supply environment we're operating in

moving to Investments the investment. We have been making in AI are already translating into strong performance across the business as you seen in our financial results.

Philipp Schindler: We're heavily focusing on brand deals, on measurement efforts. So there's a lot of interesting work in the pipeline. And on top of that, we actually see opportunity also for upside with performance advertising. There's a lot of momentum with Demand Gen adoption across small and medium advertisers. We're also excited about the opportunity for continued ads innovation and direct response, like, for example, shoppable formats, including in the living room, which is then helping drive strength in retail, the continued momentum in shorts, and so on. So overall, we're quite excited, yeah.

Our successful execution, coupled with strong, performance, reinforces our conviction to make the Investments required to further, capitalize on the AI opportunity.

Philipp Schindler: We're also excited about the opportunity for continued ads innovation and direct response, like, for example, shoppable formats, including in the living room, which is then helping drive strength in retail, the continued momentum in shorts, and so on. So overall, we're quite excited, yeah. Great. And Mark, in terms of Gemini adoption and what this moment means for SaaS, et cetera, look, at least from my vantage point, I definitely see we have very, very good SaaS customers who are leaders in their respective categories. And 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.

For the full year 2026, we expect CapEx to be in the range of $175 billion to $185 billion, with investments ramping over the course of the year.

We're investing in AI compute capacity to support Frontier Model development by Google DeepMind. Ongoing efforts to improve the user experience and drive higher advertiser ROI, and Google services.

Sundar Pichai: Great. And Mark, in terms of Gemini adoption and what this moment means for SaaS, et cetera, look, at least from my vantage point, I definitely see we have very, very good SaaS customers who are leaders in their respective categories. And 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.

Significant Cloud customer demand as well as strategic investments in other bets.

Keep in mind that the availability of supply, pricing of components, and timing of cash payments can cause some variability in the reported CapEx number.

in terms of expenses, as we've discussed in previous calls, the significant increase in our investments in technical infrastructure, will continue to put pressure on the p&l in the form of higher depreciation, expense and related data centers, operations costs, such as energy in 2025 depreciation increased by nearly 6 billion dollars or 38%

Philipp Schindler: And I think it is an enabling tool, just like it has been an enabling tool for us across our products and services, be it search, YouTube, et cetera. I think the companies who are seizing the moment, I think, have the same opportunity ahead. And at least we are excited about the partnerships we have there and the momentum. If I look at it in terms of their tokens usage, et cetera, the growth has been very robust in Q4.

Sundar Pichai: And I think it is an enabling tool, just like it has been an enabling tool for us across our products and services, be it search, YouTube, et cetera. I think the companies who are seizing the moment, I think, have the same opportunity ahead. And at least we are excited about the partnerships we have there and the momentum. If I look at it in terms of their tokens usage, et cetera, the growth has been very robust in Q4.

From $15.3 billion in 2024 to $21.1 billion in 2025.

Given the increase in our capex investments. In recent years. We expect the growth rate in 2026 depreciation to accelerate in q1 and meaningfully increase for the full year. For also plan to continue hiring and key investment areas such as Ai and Cloud.

In 2025, our teams delivered amazing innovation, executing with a high level of discipline and velocity.

[Analyst] (Morgan Stanley): Thank you.

Mark Mahaney: Thank you.

Operator: Your next question comes from Mark Shmulik with AllianceBernstein. Your line is now open.

These efforts provide a great experiences for consumers and outstanding performance for creators partners and Enterprise customers driving strong Revenue growth.

[Analyst] (AllianceBernstein): Yes. Thanks for taking the questions, two, if I may. The first for Anat is, can you talk a little bit more about the relationship between investment levels and how you kind of expect core performance to trend? Is there an operating income or a free cash flow objective that you solve towards? Or how do you think about greenlighting resources and projects? And then the second question is for all of you. A year ago, we probably could have guessed the answer to this question. But given where we are today for each of you, what keeps you up at night here as you think about the Google story and what's next? Thanks.

Mark Shmulik: Yes. Thanks for taking the questions, two, if I may. The first for Anat is, can you talk a little bit more about the relationship between investment levels and how you kind of expect core performance to trend? Is there an operating income or a free cash flow objective that you solve towards? Or how do you think about greenlighting resources and projects? And then the second question is for all of you. A year ago, we probably could have guessed the answer to this question. But given where we are today for each of you, what keeps you up at night here as you think about the Google story and what's next? Thanks.

I want to take this opportunity to thank our employees for their contribution to this impressive performance.

Now, Cinderella and I will take your questions.

Thank you. As a reminder, to ask a question you will need to press star 1 on your telephone to prevent any background noise. We ask that you please mute your line. Once your question has been stated, your first question comes from Brian Nowak with Morgan Stanley. Your line is now open.

Anat Ashkenazi: Thanks, Mark. Let me start with a question on the investment framework. It's an important one, and as you can imagine, an important one for us as well. We have a highly rigorous framework that we use internally, where we look at all the need for investment, whether it's from our own organization or from external customers, and have an estimate of what that investment could potentially yield, obviously not just near-term but long-term as well. We take that into consideration when we make the following decision. The first one is the total investment that we make across the company. This was, for example, in 2025, the $91 billion we invested in CapEx, and our estimate for CapEx investment this year. What's the total envelope that we want to invest to ensure that we can drive both near-term and long-term growth for the company?

Thanks for taking my questions. I've I have 2, uh, 1 on agentic 1 on YouTube. The first 1 on on agentic Thunder. I be, I'd be curious to hear about as you look back at 2025. Where do you think you made the most progress on new types of agentic Commerce products? And then looking at the 26? Where are you? Most optimistic sort of have even more progress and utility for users and your advertisers

And the second 1 is on YouTube. You know we've seen a lot of the new content creation models like Jeanne Etc. Walk us through sort of the the alphabet long-term vision for how Genie and some of these content creation tools could be integrated into into YouTube over time.

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