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Alphabet (GOOGL) recently posted robust fourth-quarter and full-year results, with its annual revenue surpassing the $400 billion mark for the first time in its history. Growth accelerated across Alphabet\u2019s core businesses, driven largely by artificial intelligence (AI)-led capabilities, while its backlog expanded meaningfully.<\/p>\n
While its strong Q4 performance should have propelled the stock higher, Alphabet\u2019s share price instead lost steam. The primary reason is due to investor concern over capital expenditures (capex). As Alphabet continues to deepen its AI capabilities and scale infrastructure to meet rising demand, management has guided for a substantial increase in spending. Capex is expected to reach between $175 billion and $185 billion in 2026, nearly double the $91.5 billion invested in 2025, with spending set to ramp up as the year progresses.<\/p>\n
Higher capex will drive faster depreciation growth, beginning in the first quarter of 2026 and increasing meaningfully over the full year. As a result, free cash flow is likely to come under pressure, creating a headwind that the market is already factoring into the stock\u2019s valuation.<\/p>\n
The muted reaction post Alphabet\u2019s solid Q4 results suggests that investors were not comfortable with the scale of the spending increase. However, this pushback does not undermine the long-term investment thesis. The elevated capex is due to Alphabet\u2019s strategy to defend and expand its leadership in AI, cloud computing, and digital advertising, areas that continue to show strong demand and long-term growth potential.<\/p>\n
While the near-term impact on free cash flow may weigh on sentiment, Alphabet\u2019s underlying business strength, accelerating growth, and strategic positioning in AI support its investment case.<\/p>\n Alphabet has faced investor skepticism about its high capex guidance for 2026. Yet, the company\u2019s latest results and outlook suggest GOOGL stock remains a compelling investment.<\/p>\n Its aggressive investment in AI is already translating into tangible business momentum. In the fourth quarter of 2025, Alphabet delivered robust financial performance, with consolidated revenue rising 18% year-over-year (YOY) to $113.8 billion. Growth was broad-based, led by acceleration in Search and Google Cloud. These results highlight AI as becoming a meaningful growth engine across Alphabet\u2019s core businesses.<\/p>\n<\/p><\/div>\n