Alphabet Inc. (NASDAQ: GOOGL) shares rose 0.64% to close at $312.90 on Feb. 25, 2026, extending a strong recovery as the Google parent company continues to demonstrate accelerating revenue growth fueled by artificial intelligence advancements and surging demand for Google Cloud, even as massive capital expenditures raise questions about near-term returns.

Google's original principles when it came to developing artificial intelligence were not to use it for weapons or surveillance that could infringe on people's rights
Google AFP

The modest daily gain came amid elevated trading volume of nearly 30 million shares and followed a period of consolidation after the stock hit a 52-week high near $349 earlier in February. Year-to-date, Alphabet has lagged the broader market slightly but remains up more than 70% over the past 12 months, reflecting sustained investor enthusiasm for its AI leadership despite a recent pullback from peaks.

The primary catalyst remains Alphabet's fourth-quarter 2025 earnings reported Feb. 4, 2026, which showcased record performance. Consolidated revenues jumped 18% year over year to $113.8 billion, surpassing expectations, while net income rose 30% to $34.5 billion and diluted earnings per share climbed 31% to $2.82, beating consensus estimates of around $2.61. Google Services revenues increased 14% to $95.9 billion, driven by 17% growth in Search & other and strong contributions from subscriptions and devices. YouTube ads and subscriptions pushed the platform's full-year revenue above $60 billion for the first time.

Google Cloud delivered standout results, with revenues surging 48% to $17.7 billion amid booming demand for AI infrastructure and enterprise solutions. The segment's operating income turned sharply positive, highlighting improved profitability as AI tools like Gemini integrate deeply into customer workflows. CEO Sundar Pichai highlighted that the Gemini app now exceeds 750 million monthly active users, with first-party models processing over 10 billion tokens per minute via API.

To fuel this momentum, Alphabet guided 2026 capital expenditures to $175 billion-$185 billion — nearly double the $91.4 billion spent in 2025 — primarily for AI data centers, compute capacity and infrastructure to meet exploding demand. The forecast, announced alongside earnings, initially pressured shares due to concerns over elevated spending and uncertain monetization timelines in a competitive AI landscape. However, analysts have increasingly viewed the investment as a moat-widening move, positioning Alphabet ahead in the race against rivals like Microsoft and Amazon.

Recent developments reinforce this narrative. On Feb. 25, Alphabet announced that its robotics software company Intrinsic, formerly an "Other Bets" moonshot, would fold into Google to accelerate physical AI integration. The move streamlines operations and aligns robotics efforts with broader AI ambitions. Alphabet has also secured major clean energy deals, including partnerships with Xcel Energy in Minnesota and AES in Texas, to power new data centers sustainably amid regulatory and grid constraints.

The company raised over $30 billion in a global debt offering earlier in February to support these expenditures, underscoring confidence in long-term cash flows despite higher leverage. Alphabet maintains a robust balance sheet with significant net cash and initiated or increased dividends, including a $0.21 quarterly payout (ex-date March 9, 2026).

Regulatory and competitive dynamics persist as risks. Antitrust scrutiny continues following prior rulings, though favorable outcomes — such as avoiding severe remedies like divesting Chrome or Android — have eased overhangs and boosted sentiment. Ongoing cases in the U.S. and EU could influence future operations, but analysts note Alphabet's data advantages and scale provide resilience.

Institutional activity reflects mixed but generally positive views. Some funds trimmed positions modestly, while others added significantly; Stratos Wealth Partners increased holdings by millions. Consensus analyst targets hover around $366-$376, implying 17-20% upside from current levels, with a "Moderate Buy" rating. Valuation stands at a forward P/E near 28x based on projected 2026 earnings, elevated from historical averages but justified by accelerating growth.

Broader market context includes AI sector enthusiasm, with peers facing similar capex pressures. Bond investors have flagged AI spending bubbles as a top risk, yet Alphabet's execution — including Gemini integrations with partners like Apple for Siri enhancements and Walmart for shopping — demonstrates tangible progress toward monetization.

As the company prepares for Q1 2026 earnings in late April, focus will remain on cloud backlog (nearing $240 billion), AI-driven search expansions like AI Overviews, and capex deployment efficiency. With annual revenues surpassing $400 billion for the first time in 2025 and clear paths to higher margins, Alphabet appears well-positioned to capitalize on the AI era despite short-term spending headwinds.

Investors continue monitoring geopolitical factors, energy costs for data centers and competitive AI model releases. For now, the stock's resilience amid heavy investment signals market belief in Alphabet's ability to convert scale and innovation into sustained leadership and shareholder value.