Alphabet (GOOGL) Q4 Earnings Preview: Can AI and cloud momentum sustain the $4 trillion valuation?

• Alphabet (GOOGL) faces high investor expectations following a year of significant stock growth, with the core focus being proof that massive capital investments in AI
• Wall Street expects a strong quarter, projecting revenue of approximately $111.4 billion (+15.4% YoY) and Earnings Per Share (EPS) of $2.64
• Critical items for investors include updates on AI monetization (Gemini integration, Search evolution), the conversion velocity and margin expansion of Google Cloud

Most Read: RBA breaks two-year pause with hawkish rate hike, AUD/USD poised for further gains

Alphabet Inc. (GOOGL) is scheduled to release its fourth-quarter 2025 earnings on Wednesday, February 4, 2026, after the market close. The tech giant enters this report following a historic year in which its stock surged nearly 70%, propelling its market capitalization past the $4 trillion milestone in January.

As the "Magnificent 7" leader in 2025 performance, Alphabet faces high expectations. Investors will be looking for proof that its massive capital investments in AI are translating into sustained revenue growth and improved margins.

Wall Street consensus points toward another robust quarter of double-digit growth.

Revenue: Analysts expect approximately $111.4 billion, representing a 15.4% year-over-year increase. This follows a Q3 where Alphabet surpassed the $100 billion quarterly revenue mark for the first time.

Earnings per share (EPS): Estimates are pegged at $2.64, a significant jump from the $2.15 reported in the same period last year.

Growth drivers: Google Search remains the bedrock, projected to bring in roughly $61.3 billion, while Google Cloud is expected to continue its rapid ascent with an estimated $16.25 billion (up ~36% YoY).

The projected contraction in free cash flow, despite rising net income, is a direct consequence of the aggressive infrastructure "land grab" necessitated by the AI race. Market participants are particularly focused on the operating margin expansion, which is expected to reach 39.1%, driven by a combination of high-margin cloud services and the internal "Project EAT" initiative, which leverages AI to streamline internal workflows and reduce headcount growth relative to revenue.

AI monetization and "Gemini" integration

The central narrative for 2026 is the transition from AI experimentation to monetization. Alphabet has aggressively integrated its Gemini models across its ecosystem.

Investors will scan the report for:

Search evolution: Updates on "AI Overviews" and their impact on user engagement and ad click-through rates.

Enterprise adoption: Updates on Gemini for Workspace and the rate at which enterprise customers are converting from free trials to paid tiers.

Partnerships: Any further commentary on the high-profile collaboration with Apple to integrate Gemini into "Apple Intelligence" features.

Google Cloud’s Battle for Market Share

Google Cloud has historically been the "third player" behind AWS and Azure, but it has recently shown faster growth rates. With a reported backlog of $155 billion at the end of Q3, the focus will be on conversion velocity, how quickly that backlog is turning into realized revenue and whether cloud margins continue to expand despite the heavy cost of AI infrastructure.

Capex and 2026 guidance

Capital expenditure (Capex) has become the most scrutinized metric for big tech. Alphabet previously guided for 2025 Capex between $91 billion and $93 billion. Investors are wary of "over-spending" without immediate returns. A guide for 2026 that shows a stabilization or "peaking" of investment could be seen as a positive for free cash flow, while a massive hike without clear revenue justification might spook the market.

Regulatory and macro headwinds

While the AI rally has dominated headlines, regulatory scrutiny remains a background noise. Additionally, analysts will look for the impact of a "post-election" cooling in digital ad spending, as the massive surge from the 2024 US elections will create a tough year-over-year comparison for the YouTube and Search segments.

The market's reaction will likely be "binary" based on the guidance provided:

The bull case: If Alphabet delivers a "beat and raise" exceeding EPS estimates while providing a optimistic outlook for 2026 Cloud growth the stock could test the $350-$360 level. Jefferies recently raised its price target to $400, suggesting significant upside if AI execution remains flawless.

The bear case: Alphabet is currently trading at a premium compared to its historical averages. Any sign of slowing Cloud momentum or a "miss" in Search revenue due to AI-driven disruption could lead to a swift correction. Support levels are currently pegged around $304 (mid-January lows).

Alphabet Daily Chart, February 3, 2026

Alphabet has successfully silenced many "AI laggard" critics over the past 12 months. However, with the stock at all-time highs and a $4 trillion valuation to defend, there is little room for error. The February 4th report will be the ultimate litmus test: is Alphabet’s AI "full stack" approach a sustainable engine for growth, or has the valuation outpaced the reality of the bottom line?

Follow Zain on Twitter/X for Additional Market News and Insights @zvawda