Focus: U.S. Stocks Q4 2025 Earnings Reports
Sundar Pichai, CEO of Google, deserves recognition. Alphabet, Google's parent company, released impressive fourth-quarter results on Wednesday. This indicates that, similar to its digital advertising peer Meta Platforms, Google is beginning to reap the rewards of its substantial investments in artificial intelligence. Alphabet reported that the revenue growth rate for Google Search accelerated from 15% in the third quarter to nearly 17%. Even more striking, the growth rate for Google Cloud surged by 14 percentage points to reach 48%. Several years ago, when Google faced challenges in AI, some commentators, including this author, suggested Pichai should step down. Those views now appear profoundly mistaken.
The growth in Search should alleviate investor concerns from a year or two ago that AI chatbots would undermine Google's core business. Philipp Schindler, Google's Chief Business Officer, told analysts that, on the contrary, AI is helping Google improve ad performance and enabling it to place ads against more complex search queries. However, the more notable development is the growth of Google Cloud. In the fourth quarter, Google Cloud's revenue reached an annual run rate of $71 billion, an extraordinary achievement for a business that generated under $20 billion in revenue back in 2021. For context, the industry leader, Amazon Web Services, reported a $132 billion run rate in the third quarter; its fourth-quarter performance will be known on Thursday. Equally important, Google achieved this growth while expanding its operating margin from 23.7% in Q3 to 30%.
While the 30% margin still lags behind larger competitors, Google has finally demonstrated that its cloud business is a substantial enterprise. Very few technology companies globally have achieved significant success in both consumer and enterprise sectors—Amazon is one—and Google now appears poised to become the next.
Despite the strong performance, Alphabet's stock declined by 1-2% in after-hours trading. This may suggest that investors are growing somewhat weary of the AI narrative. Concerns about AI's potential disruption to existing software businesses triggered significant sell-offs in software stocks this week. Apprehension regarding the costs of AI development also persists. A prime example: Alphabet stated it plans to double its capital expenditures this year to a range of $175 billion to $185 billion to build more computing infrastructure. For comparison, Alphabet generated $164.7 billion in cash flow from operations in 2025. The company has increased its debt load and, continuing on this path, may need to borrow substantially more in the future. It has already reduced its stock repurchase spending.
Like other tech firms, Alphabet faces rising AI-related operating expenses. The company separately listed costs for its DeepMind AI research unit as a special item; this expense doubled to $5.9 billion this quarter. While this item includes other costs, Alphabet stated it primarily represents allocated AI costs across business segments. Furthermore, Alphabet's headcount has risen back above peak levels seen before the major layoffs in early 2023. The company reported 190,820 employees as of December 31. The overall outlook for Alphabet remains positive, especially compared to many peers, yet investor sentiment remains cautious.
**Anthropic's Bold Move** It takes considerable nerve to run an advertisement promising not to run advertisements. This is precisely what AI company Anthropic is doing: a commercial planned for this year's Super Bowl will promote its newly announced policy of not placing ads within its Claude chatbot. How virtuous! It is also a straightforward way to draw a sharp contrast with competitor ChatGPT, whose parent company OpenAI stated last month it would begin testing ads in free and lower-priced versions of ChatGPT. Sam Altman, CEO of OpenAI, offered a brief response to this development.
**Other News** * Microsoft CEO Satya Nadella announced Wednesday that Charlie Bell, head of Microsoft Security, will be succeeded by former Microsoft executive Hayete Gallot. Gallot, who previously served as President of Google Cloud Customer Experience, remains at Microsoft. Bell will also stay with the company. * Uber reported a 20% increase in fourth-quarter revenue, with operating profit rising significantly. The business showed signs of accelerating growth, particularly in its food delivery segment. However, Uber anticipates growth will moderate slightly in the first quarter. * AWS CEO Matt Garman stated that existing technology is "still a long way off" from enabling data centers in space, an idea Elon Musk has cited as part of the rationale for merging SpaceX with xAI. * The Washington Post plans to cut about one-third of its newsroom positions. Executive Editor Matt Murray stated in an internal memo that natural search traffic to the newspaper's website has nearly halved over the past three years. * AI chip startup Cerebras Systems announced Wednesday it has secured approximately $1 billion in a new funding round, resulting in a post-money valuation, including the new investment, of $23 billion.
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