Google just delivered a brutal lesson in Wall Street expectations. Despite crushing Q4 earnings with $113.83 billion in revenue and explosive cloud growth, Alphabet shares plunged 5% Thursday as investors absorbed the shock of a staggering $175-185 billion AI capital spending plan for 2026 - more than double last year's outlay. The market's harsh verdict: even spectacular results can't justify what amounts to one of the largest infrastructure bets in tech history.
Alphabet delivered a masterclass in how to beat earnings and still get punished. The Google parent reported Q4 revenue of $113.83 billion Wednesday evening, sailing past the $111.43 billion analyst consensus from LSEG. But instead of celebrating, investors hit the sell button, driving shares down 5% Thursday after an already rough 2% decline the day before.
The culprit? A jaw-dropping capital expenditure forecast that has Wall Street questioning whether Google's AI ambitions have crossed from visionary into reckless. The company announced it'll spend between $175 billion and $185 billion in 2026 on infrastructure - more than double what it laid out in 2025. The bulk of that money is earmarked for AI compute capacity to power Google DeepMind, the company's cutting-edge AI research lab.
The numbers themselves told a story of a company firing on multiple cylinders. Google Cloud absolutely crushed it, pulling in $17.66 billion against Street Account's $16.18 billion estimate. That's the kind of beat that normally sends tech stocks soaring. YouTube Advertising came in slightly softer at $11.38 billion versus the $11.84 billion forecast, but nothing that would typically trigger a selloff.
Yet here we are. By 7:50 a.m. ET Thursday, Alphabet had shed 4.9% in premarket trading. The market's message was clear: beating today's numbers doesn't matter if tomorrow's spending spooks investors worried about returns on investment.
Barclays analysts tried to make sense of the dichotomy in a Thursday note. "Infrastructure, DeepMind, and Waymo costs weighed on overall Alphabet profitability, and will continue to do so in 2026," they wrote, acknowledging the elephant in the room. But they also saw the flip side: "Cloud's growth is astonishing, measured by any metric - revenue, backlog, API tokens inferenced, enterprise adoption of Gemini."
