Alphabet Inc. (NASDAQ: GOOGL) shares closed at $331.25, down $1.79 (-0.54%) at 4:00:02 PM EST, before sliding further to $326.82, a decline of $4.43 (-1.34%), in after-hours trading. Alphabet Inc. delivered a decisive fourth-quarter earnings beat, but Wall Street’s reaction has been anything but one-dimensional. While analysts broadly raised price targets and reiterated bullish ratings, investor sentiment has been tempered by Alphabet’s aggressive 2026 capital expenditure outlook, reigniting debate over whether Big Tech has entered a full-scale AI spending war.
Analysts Stay Bullish, Raise Targets
Despite near-term volatility, top analysts doubled down on Alphabet’s long-term AI-led growth thesis. Doug Anmuth of JPMorgan maintained a Buy rating and raised his price target from $385 to $395. Mark Kelley of Stifel reiterated a Strong Buy. Meanwhile, John Blackledge of TD Cowen maintained a Strong Buy rating, increasing his target from $355 to $365.
Earnings Highlights Underscore Scale Advantage
Alphabet reported consolidated revenue of $113.8 billion, up 18% year over year, marking the first fiscal year in which the company exceeded $400 billion in total revenue, a milestone under CEO Sundar Pichai. Google Search generated $63.1 billion, up 17%, supported by AI-powered query enhancements that management said have doubled daily AI-assisted searches.
Google Cloud delivered standout performance, with revenue of $17.7 billion, surging 48% year over year. Cloud backlog climbed to $240 billion, up 55% sequentially, reinforcing long-duration visibility. YouTube surpassed $60 billion in annual revenue, with paid subscriptions exceeding 325 million, strengthening Alphabet’s recurring revenue base.
On the AI front, Gemini 3 (Pro) is now processing more than 10 billion tokens per minute, serving approximately 750 million monthly active users, positioning Alphabet among the most scaled AI platforms globally.
Commenting on the earnings, Sundar Pichai, CEO of Alphabet and Google, stated, “It was a tremendous quarter for Alphabet and annual revenues exceeded $400 billion for the first time. The launch of Gemini 3 was a major milestone, and we have great momentum. Our first party models, like Gemini, now process over 10 billion tokens per minute via direct API use by our customers, and the Gemini App has grown to over 750 million monthly active users.”
Moreover, Apple and Google announced a multi-year partnership in early January to integrate Google’s Gemini AI and cloud technology into Apple’s next-generation Foundation Models, powering future Apple Intelligence features, including a more personalized Siri.
The collaboration strengthens Alphabet’s AI monetization and distribution reach while allowing Apple to maintain on-device processing, Private Cloud Compute, and its industry-leading privacy standards.
CapEx Shock Drives Stock Volatility
Despite the operational strength, Alphabet’s elevated CapEx forecast unsettled markets. The company framed spending as necessary to support AI infrastructure, custom silicon, data centers, and Cloud demand, but investors worry that near-term free cash flow could face pressure. Shares of Alphabet were trading around $333.34 after management disclosed a 2026 CapEx guide of $175 billion to $185 billion, well above market expectations.
Analysts broadly agree that the spending reflects a structural shift rather than a cyclical surge. Alphabet is effectively signaling that leadership in AI requires industrial-scale investment, similar to earlier eras of cloud buildouts.
Long-Term Optionality Beyond Core Businesses
Alphabet’s “Other Bets” continue to add strategic optionality. Waymo has now completed more than 20 million autonomous trips and delivers over 400,000 weekly rides, underscoring progress toward commercialization.
Wall Street’s message is clear: Alphabet’s fundamentals remain exceptionally strong, and analyst conviction is rising. However, the stock’s near-term trajectory will hinge on whether investors view the $185 billion CapEx plan as a disciplined investment or an escalation in an increasingly expensive AI arms race.
