Google Earnings Report
Google (Alphabet) reported its Q4 2025 results yesterday. The actual business performance was strong, but the market reacted slightly negatively to their spending plans.
The Results
Google beat expectations across the board:
Revenue: $113.8 billion (vs $111.4 billion expected)
Search advertising revenue beat expectations
Google Cloud grew 48% year-on-year and is accelerating
Gemini now has 750 million monthly active users
These are strong results. In a normal market environment, you'd expect the stock to rise 5-10% on news like this.
Why the Stock Fell 4%
The issue wasn't the results, it was what Google announced about their spending plans. They're planning to spend $175-185 billion on capital expenditure in 2026. That's roughly double what they spent in 2025.
This spending will go toward AI infrastructure, data centers, and cloud computing capacity. Google says customer demand for AI services is "unconstrained" and they want to get ahead of it.
The Market's Concern
Investors are nervous about this level of spending across all the big tech companies, not just Google. The concern is simple: are these companies going to get a decent return on all this money they're pouring into AI infrastructure?
It's worth noting that companies like Broadcom (which sells the chips and equipment Google needs) jumped 5% on Google's announcement so the market believes the spending is real, they're just questioning whether it makes sense for all Tech companies
The Bigger Picture
This isn't really about Google specifically. Tech stocks have had a tough week, with investors generally reacting negatively to earnings announcements across the sector. There's been a rotation out of tech stocks and into less risky sectors—companies like Coca-Cola and Pepsi that aren't affected by AI disruption. After tech stocks had a strong 2025, some profit-taking and caution is understandable.
Our View
Of the big tech companies, Google is arguably looking the strongest right now, the actual business results are outstanding. It's a high quality company with solid fundamentals.
That said, there is genuine market concern about risk across the tech sector broadly, which is why we've been emphasizing investment processes built on reasonable valuations. This approach carries less risk when sentiment shifts, as we're seeing this week.
Google is a good company to hold as part of a sensible portfolio. The business fundamentals are strong, revenue is growing, cloud is accelerating (up 48% in last year), and they're generating enormous cash flow. The only real question mark is whether this massive increase in spending will deliver the returns shareholders expect.
As we've always emphasized, we focus on the long term, quarters, years, and decades rather than daily movements. Our wider valuation based approach means we have diversification away from pure tech growth stocks, which provides some stability during rotations like this and even opportunities.
We'll continue to monitor how Google and the broader tech sector manage these investments, but for now, the core business remains healthy.
As always, feel free to reach out if you have questions.