Financial Report Outlook | From Burning Money to Monetization, can Alphabet (GOOGL.US) AI Investment open up profit space in 2026?

Alphabet Inc. Class C's parent company Alphabet (GOOGL.US) will announce its fourth quarter results for the 2025 fiscal year after the US stock market closes on Wednesday (early morning of February 5th Beijing time). The market expects their Q4 revenue to reach $111.45 billion, a year-on-year increase of 15.53%; and expects earnings per share to be $2.64, a year-on-year increase of 23%. Over the past year, Alphabet's stock price has far outperformed the S&P 500 index, driven by the commercialization of AI technology, strong growth in cloud services, and recovery in the advertising market. Stable double-digit growth Alphabet has consistently achieved double-digit EPS growth in the past 10 quarters, exceeding market expectations in the past four quarters, setting an optimistic tone for this earnings report. Analysts expect total revenue to reach around $111.43 billion, a year-on-year increase of approximately 15.5%; for earnings per share, the market consensus expectation is $2.64, a 23% increase from the same period last year. Cloud computing and advertising are key driving factors, with analysts believing that market expectations are achievable. For example, it is expected that the cloud computing market will grow at a compound annual growth rate of about 15.7% after 2026, indicating strong growth momentum. Analysts also believe that the digital advertising market will see similarly strong growth, with a compound annual growth rate exceeding 13% from 2026 to 2035. This indicates that the company is in a high-growth market, and its growth momentum is likely to be sustained in the long term. Three core concerns of the market Investors should focus on three key indicators in the upcoming report. First, investors should closely monitor the backlog of orders and profit margin trends for Alphabet Inc. Class C's cloud. By the third quarter of 2025, the backlog of orders for Alphabet Inc. Class C's cloud is expected to reach around $155 billion, and any updates on conversion rates or performance guidance for 2026 may confirm its long-term growth prospects. Another key area to watch is the commercialization signals of artificial intelligence. The market should pay attention to adoption indicators for Gemini, corporate customer case studies, and even new AI-driven search functions. This will help understand the logic behind the huge investments in AI. Rapid market adoption will prove the rationality of these investments and may consolidate positive market sentiment. The last point worth noting is the outlook for capital expenditures and free cash flow. The market currently expects Alphabet's fourth quarter capital expenditures to surge 91.3% to $27.3 billion. Investors are concerned about whether the massive investments can actual profit returns, as excessive spending may squeeze overall profit margins in the short term. Special attention should also be given to the guidance for these two indicators in the 2026 fiscal year, as reaching a peak in spending will indicate a turning point in free cash flow and may pave the way for sustainable profit margin growth. The "ace card" of this earnings report lies not in whether revenue meets expectations, but in the management's outlook on the monetization path of AI in 2026, and whether they can prove that their substantial investments are turning into more efficient cloud services and smarter advertising products.