Buy Alphabet Stock After Strong Q4 Results or is it Too Soon?
- Finance
ThePostMaster- 0
- 11 minutes read
Posting strong Q4 results yesterday evening, Alphabet GOOGL stock still dipped half a percentage point in Thursday’s trading session as investors pondered its massive spending plans.
Some profit-taking may have also contributed to GOOGL falling as much as 8% before paring back early morning losses.
The debate of whether it’s too soon to buy Alphabet shares following its strong Q4 report is intensified, considering GOOGL has rallied more than +70% in the last year with market-leading returns of over +200% in the last three years.
Image Source: Zacks Investment Research
Excluding total traffic acquisition costs (TAC), the portion of revenues shared with Google’s partners, Alphabet’s Q4 sales came in at a quarterly peak of $97.23 billion, surpassing estimates by 2% and spiking 19% year over year. This was driven by a 48% surge in Google Cloud revenue at $17.66 billion, attributed to AI-driven demand. Search and YouTube ads helped significantly as well, driving Google Services revenue up 14% to $95.86 billion.
On the bottom line, record Q4 net income of $34.46 billion or adjusted earnings of $2.82 per share beat expectations by nearly 10% and soared 31% from EPS of $2.15 a year ago. Additionally, it’s noteworthy that Alphabet’s Q4 operating cash flow hit a peak of $52.4 billion.
Image Source: Zacks Investment Research
Rounding out fiscal 2025, Alphabet’s annual revenue surpassed $400 billion for the first time ($403B), increasing 15% YoY. Full-year adjusted EPS was up 34% to a record $10.13 from $8.04 per share in 2024.
The tech giant emphasized AI-driven product momentum and cloud backlog strength but didn’t provide traditional revenue or earnings guidance, which aligns with its typical practice of avoiding detailed financial forecasts. Notably, Google Cloud backlog reached $240 billion at the end of Q4, a 55% sequential increase.
The most detailed guidance Alphabet provided was its 2026 capital expenditures projections of $175-$185 billion, nearly double the $91-$93 billion spent in 2025.
The immense record spending is focused on data centers in regard to building out AI compute capacity and cloud infrastructure to meet rising enterprise demand.
“Leaning fully into AI,” Alphabet stated that it expects infrastructure spending to remain elevated beyond 2026.
What could help offset Alphabet’s CapEx concerns is that the tech giant has an impressive return on invested capital (ROIC) percentage of 31.6%.
