Yahoo Finance·2026-02-04 23:44Core Insights - The surge in questions regarding the future of artificial intelligence (AI) reflects investor concerns about the ability of companies to recover their substantial investments in AI [1] Financial Performance - Alphabet reported fourth-quarter revenue of $113.8 billion, an 18% increase year over year, with a 31% rise in diluted earnings per share (EPS) to $2.82 [3][4] - The operating margin remained steady at 32%, indicating strong profitability [3] Advertising Revenue - Google search and advertising remain the primary revenue sources for Alphabet, with search revenue increasing by 17% year over year, while YouTube's growth was about 9% [5] - Overall, Google ad revenue grew by 14%, alleviating investor concerns regarding potential revenue loss due to AI [5] Cloud Services Growth - Google Cloud revenue surged to $17.7 billion, reflecting a 48% increase, which is an acceleration from the 34% growth seen in the previous quarter [6] - This growth outpaced Microsoft's Azure Cloud growth of 39%, indicating Alphabet's competitive position in the cloud market [6] - Operating margins for Google Cloud improved to 30.1%, up from 23.7% in Q3, demonstrating enhanced profitability [7] AI Strategy and User Engagement - Alphabet reported selling over 8 million paid seats of Gemini Enterprise, with the Gemini app now boasting over 750 million monthly active users [8] - There has been a significant increase in user engagement since the release of Gemini 3, highlighting strong demand for cloud and AI services [8] Future Investment Plans - Alphabet plans to significantly increase its investment in cloud and AI, expecting to double its capital expenditures to between $175 billion and $180 billion by 2026, up from approximately $91 billion last year [9]