Alphabet surpasses USD 400 billion annual revenue as AI and Cloud demand soar

Alphabet has reported its financial performance for the fiscal year ended on 31 December 2025, with its annual revenue crossing the USD 400 billion threshold for the very first time.

In the final quarter of 2025, consolidated revenue rose 18% year-over-year to USD 113.8 billion. This growth brought Alphabet’s full-year revenue to USD 402.8 billion, a 15% increase over 2024. Net income for the quarter reached USD 34.5 billion, showing a 30% jump that outpaced revenue growth.

The growth engines

The company’s fourth-quarter results exceeded market expectations, fueled by an acceleration in Google Cloud and the rapid integration of the Gemini 3 model across its product ecosystem.

Google Cloud emerged as the standout performer of the quarter, with revenue surging 48% to 17.7 billion. The segment’s operating income more than doubled to USD 5.3 billion, with operating margins expanding to 30.1% from 17.5% just a year ago.

This growth is largely being attributed to enterprise demand for Ai infrastructure and specialised AI solutions. The Cloud division exited the year with an annual revenue run rate exceeding USD 70 billion and a backlog that grew 55% sequentially to USD 240 billion.

CEO Sundar Pichai noted that nearly 75% of Cloud customers are now using the company’s vertically optimised AI stack, spanning from specialised silicon to enterprise agents.

Dependency on advertising and subscriptions

Despite the heavy focus on Cloud, Google Services, comprising Search and YouTube remains the revenue cornerstone, contributing USD 95.9 billion in the quarter.

Search and other services generated USD 63.1 billion, up by 17%, driven by “AI Mode” queries that are reportedly three times longer than traditional text searches.

While YouTube's annual revenue across ads and subscriptions surpassed USD 60 billion for the first time. And, consumer subscriptions across Google One and YouTube Premium now exceed 325 million globally.

The USD 185 billion AI commitment

The record performance was also accompanied by a forecast for capital expenditure. Alphabet anticipates its 2026 CapEx to range between USD 175 billion and 185 billion, nearly double its 2025 spending of USD 91.4 billion.

CFO Anat Ashkenazi further clarified that approcimately 60% of this investment will target AI servers, with the remaining 40% allocated to data centres and networking equipment. This spending ramp-up aims to alleviate current compute capacity constraints and capitalise on the 400% YoY growth in revenue from products built on GenAI models.

As Alphabet deepens its technical infrastructure, it is also focusing on the unit economics of AI. The company reported a 78% reduction in Gemini serving unit costs over 2025 through model optimisation and improved hardware utilisation. Currently, the Gemini 3 Pro model processes three times as many daily tokens as its predecessor, supporting over 750 million monthly active users on the Gemini app.