Alphabet reports Q4 2025 earnings after the bell. The prior quarter delivered the first $100 billion revenue quarter with Q3 EPS $3.09 versus $2.33 estimate. Revenue of $102.35 billion grew 16% year over year, driven by Google Cloud's 34% growth to $15.2 billion and AI Overviews scaling globally. Shares climbed 61% over the past year. Management signaled $91–$93 billion capex for 2025 with unclear 2026 guidance. Depreciation and amortization rose 28% in fiscal 2024. R&D increased 22% to $15.15 billion in Q3, compressing operating margin to 30.5% due to infrastructure spending. Investors will monitor whether AI investments translate to sustainable margins rather than elevated costs.
"Last quarter delivered Alphabet's first $100 billion revenue print, with Q3 2025 EPS of $3.09 crushing the $2.33 estimate by 33%. Revenue of $102.35 billion grew 16% year over year, driven by Google Cloud's 34% growth to $15.2 billion and AI Overviews reaching global scale. Shares have climbed 61% over the past year, though momentum cooled with a 0.83% decline this week heading into the report."
"I'll be watching Google Cloud closely. The segment's acceleration to 34% year-over-year growth last quarter proved enterprise AI adoption is real, evidenced by recent wins like Humana's deployment of Vertex AI and Gemini across 20,000 member advocates and Liberty Global's five-year partnership. Whether this momentum holds amid rising competition matters. Management's capital expenditure guidance will set the tone. The company signaled $91 to $93 billion in capex for 2025, but investors need clarity on 2026 plans."
"With R&D spending up 22% year over year in Q3 to $15.15 billion, the question is whether AI investments translate to sustainable margin expansion or just elevated costs. Operating margin trajectory is another key metric. Despite gross margins expanding to 59.6% in Q3, operating margins compressed 180 basis points to 30.5% due to infrastructure spending. If Q4 shows similar pressure, it validates concerns about AI monetization lagging investment pace."
Read at 24/7 Wall St.
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