Alphabet(US:GOOGL) The Economic Times·2026-02-05 15:34Core Viewpoint - Alphabet Inc. experienced a significant stock decline of 7% to $309.32, attributed to a sharp increase in projected capital expenditures despite strong fourth-quarter sales of $97.23 billion, surpassing the consensus estimate of $95.2 billion [1][5][10] Financial Performance - Alphabet's fourth-quarter revenue reached $97.23 billion, exceeding the consensus estimate of $95.2 billion, with strong performance in advertising and cloud revenue [7][10] - The company forecasted capital expenditures could surge to $185 billion in 2026, significantly higher than the anticipated $119.5 billion, raising concerns about immediate margin compression and long-term ROI [2][3][8] Market Reaction - The stock market reacted negatively, with the S&P 500 falling 0.8% and technology stocks leading the decline, marking the sixth loss in seven trading sessions [2][4][11] - Alphabet's Class A and Class C shares fell more than 4%, resulting in a loss of tens of billions in market value [5][10] Strategic Focus - CEO Sundar Pichai emphasized that the investments in AI are expected to drive growth in search and other core businesses, arguing that AI is expanding rather than cannibalizing existing services [3][9] - The majority of the projected capital expenditures will be allocated to data centers, custom AI chips, servers, and network infrastructure to support generative AI products across various platforms [8][10] Broader Market Context - The decline in Alphabet's stock contributed to a broader pullback in U.S. equities, with semiconductor and hardware stocks also facing pressure due to cautious outlooks despite beating earnings expectations [11][12] - Economic data indicated a potential cooling labor market, with higher-than-expected jobless claims and significant layoffs announced, contributing to market caution [14][16]