Yahoo Finance·2026-02-05 15:54Core Viewpoint - Alphabet's stock experienced a decline of up to 5% due to its capital expenditure plans for 2026 exceeding forecasts, raising concerns about the sustainability of Big Tech's investments in AI [1] Financial Performance - In its fourth quarter earnings report, Alphabet projected 2026 capital expenditures between $175 billion and $185 billion, significantly higher than the $91.4 billion spent in 2025 and above Wall Street's expectation of around $120 billion for this year [2] - The company's fourth quarter revenue increased by 18% year-over-year to $113.8 billion, surpassing the expected $111.4 billion, while earnings per share rose to $2.82 from $2.15, exceeding the projected $2.65 [5] Segment Performance - Google Cloud revenue surged by 48% year-over-year to $17.7 billion, exceeding analyst expectations of $16.2 billion, driven by demand for AI products [5] - Google Services, which includes ad revenue from Search and YouTube, saw a 14% increase in revenue to $95.9 billion, also above the projected $94.9 billion [6] Investment Strategy - Alphabet's CFO indicated that the increased spending in 2026 would focus on AI computing infrastructure to support the development of advanced AI models and meet demand in its Cloud and Services segments [4] - The company aims to maintain a healthy financial position while making these investments [5] Market Context - Concerns have arisen among investors regarding the return on billions invested in AI by major tech companies, with an estimated $500 billion expected to be spent on AI investments this year by industry leaders including Microsoft, Meta, and Amazon [3] - Despite Alphabet's stock decline, it had previously risen over 20% since its last earnings report, benefiting from AI partnerships, while the broader "Magnificent Seven" group of Big Tech stocks has seen a nearly 5% decline [7]