Alphabet, Google's parent company, posted quarterly results that beat market expectations on the back of a surge in cloud institutional sector revenue. The market is taking a positive view even of its plan to sharply increase artificial intelligence (AI) infrastructure investment this year.
Alphabet said on the 4th (local time) that its fourth-quarter revenue last year rose 18% from a year earlier to $113.83 billion, or about 166 trillion won. That beat the $111.43 billion forecast compiled by market research firm LSEG.
The key growth driver was the cloud institutional sector. Fourth-quarter cloud revenue jumped 48% on-year to $17.66 billion, about $1.5 billion above the market consensus of $16.18 billion. Alphabet said this was the result of rising customer demand across corporations' AI infrastructure and solutions.
Revenue from Google services, including search and YouTube, rose 14% to $95.86 billion. Of that, advertising revenue was $82.28 billion, and other revenue including subscriptions and platforms was $13.58 billion.
Operating income increased 16% to $35.93 billion, and the operating margin was 32%. Earnings per share were $2.82, above the market expectation of $2.63.
On an annual basis, Alphabet topped $400 billion in revenue for the first time. Last year's annual revenue was $402.84 billion, or about 586 trillion won, up 15% from a year earlier. In particular, YouTube advertising and subscription revenue surpassed $60 billion for the year.
Alphabet CEO Sundar Pichai pointed to the AI model "Gemini" as the driver behind the results. Pichai said, "Gemini 3 was an important milestone and secured strong momentum," adding, "Monthly active users of the Gemini app are over 750 million." He also said the Gemini API is processing more than 10 billion tokens per minute.
Pichai said the search service also recorded the highest usage ever and emphasized that AI is providing a sustained growth engine. He also noted that annualizing fourth-quarter cloud revenue puts it above $70 billion.
Alphabet guided capital expenditures this year at $175 billion to $185 billion. That is nearly double the $91.45 billion spent last year on servers, data centers, and network equipment, and well over 50% above market expectations.
Even so, the market reaction was relatively calm. Alphabet Class A shares fell more than 6% at one point in after-hours trading immediately after the earnings release, but later rebounded and, as of 5 p.m. Eastern time, were trading around $338, up about 1.5% from the previous day.