Alphabet surpassed $400 billion in annual revenue for the first time, driven by Gemini AI adoption that reached 750 million monthly users. The Google parent company reported Q4 2025 revenue of $113.8 billion, an 18% year-over-year increase.
Google Cloud revenue surged 48% to $17.7 billion, positioning the division on a $70 billion annual run rate. Cloud backlog grew 55% sequentially to $240 billion, reflecting enterprise demand for AI infrastructure. Alphabet plans $175-185 billion in 2026 capital expenditures to expand AI data centers and computing capacity.
Gemini Enterprise sold more than 8 million paid seats in four months since launch. The AI platform now processes over 10 billion tokens per minute through direct API usage. More than 120,000 organizations use Gemini tools, including 95% of the top 20 software-as-a-service (SaaS) companies and over 80% of the top 100.
YouTube generated over $60 billion in combined advertising and subscription revenue during 2025. The platform's advertising revenue reached $11.4 billion in Q4, up from $10.5 billion a year earlier. Alphabet reported 325 million paid subscriptions across consumer services, led by YouTube Premium and Google One.
Search revenue grew 17% year-over-year to $63.1 billion. AI Mode queries average three times longer than conventional searches and frequently lead to follow-up questions. Google Services revenue reached $96 billion for the quarter.
Alphabet's partnership with Apple to integrate Gemini into Siri will extend Google's AI reach to Apple's ecosystem of devices. Analysts have focused on this AI deal as a key strategic move for Google's expansion.
The company also partnered with Reliance Jio to provide 500 million consumers with 18-month free trials of Gemini products and cloud storage. Reliance Enterprise customers gain access to Google Cloud Gemini Enterprise and TPUs.
Advertisers used Gemini to create nearly 70 million creative assets in Q4 alone. Google's advertising revenue rose 13.5% year-over-year to $82.3 billion. Direct-response ads drove YouTube growth while subscription revenue advanced in YouTube Music and Premium.
Alphabet CEO Sundar Pichai told analysts the company faces capacity constraints despite ramping infrastructure.
"We've been supply constrained even as we've been ramping up our capacity," he said, adding that constraints will continue through much of 2026.
Operating income increased 16% to $35.9 billion, while net income rose 30% to $34.5 billion. Earnings per share grew 31% to $2.82.
Alphabet's performance marks a turnaround from earlier investor concerns about AI competitiveness. Microsoft Copilot's user adoption has declined sharply as Gemini gains ground, reflecting shifting market dynamics.
Philipp Schindler, Google's Senior Vice President and Chief Business Officer, emphasized AI's transformative potential for advertising.
"We're expanding the entire playing field that advertisers can compete on," he said. "AI gives businesses the ability to reach more customers in more places than ever before."
The company is developing agentic commerce capabilities that integrate directly into Gemini, AI Mode and Search. Consumers will move from discovery to purchase inside conversational experiences, with new checkout flows introduced for select merchants.
"This is the year where you will see consumers actually being able to use all of this," Pichai said.
Alphabet's traditional advertising engines remain central to performance despite AI commanding attention. Search revenue grew 17% year-over-year, driven by strength across retail, finance and health sectors. AI Overviews and AI Mode extend session length and complexity while improving ad relevance.
Pichai noted the company lowered Gemini serving unit costs by 78% in 2025 through model optimizations and efficiency improvements. Chief Financial Officer Anat Ashkenazi said roughly 60% of capital spending goes toward servers, with 40% directed to data centers and networking.
Pichai framed the moment as both opportunity and obligation. Compute capacity, he said, is what "keeps us up at night." Alphabet's response is to invest and integrate while treating AI as infrastructure rather than just product features.
The company's 2025 focus included developing universal commerce protocols with partners. Google launched a Universal Commerce Protocol for AI shopping agents to enable seamless purchases across retailers. Early monetization efforts include Direct Offers placed beneath AI responses and agentic tools that help advertisers generate campaigns in real time.
Industry experts say the next phase of AI competition depends not only on technology leadership, but also on which companies can most effectively turn AI innovation into long-term revenue growth. Alphabet's results demonstrate that Gemini adoption drives measurable financial impact across search, cloud and advertising segments.
