"Last quarter delivered Alphabet's first $100 billion revenue print, with Q3 2025 EPS of $3.09 crushing the $2.33 estimate by 33%. Revenue of $102.35 billion grew 16% year over year, driven by Google Cloud's 34% growth to $15.2 billion and AI Overviews reaching global scale. Shares have climbed 61% over the past year, though momentum cooled with a 0.83% decline this week heading into the report."
"I'll be watching Google Cloud closely. The segment's acceleration to 34% year-over-year growth last quarter proved enterprise AI adoption is real, evidenced by recent wins like Humana's deployment of Vertex AI and Gemini across 20,000 member advocates and Liberty Global's five-year partnership. Whether this momentum holds amid rising competition matters. Management's capital expenditure guidance will set the tone. The company signaled $91 to $93 billion in capex for 2025, but investors need clarity on 2026 plans."
"With R&D spending up 22% year over year in Q3 to $15.15 billion, the question is whether AI investments translate to sustainable margin expansion or just elevated costs. Operating margin trajectory is another key metric. Despite gross margins expanding to 59.6% in Q3, operating margins compressed 180 basis points to 30.5% due to infrastructure spending. If Q4 shows similar pressure, it validates concerns about AI monetization lagging investment pace."
Alphabet reports Q4 2025 earnings after the bell. The prior quarter delivered the first $100 billion revenue quarter with Q3 EPS $3.09 versus $2.33 estimate. Revenue of $102.35 billion grew 16% year over year, driven by Google Cloud's 34% growth to $15.2 billion and AI Overviews scaling globally. Shares climbed 61% over the past year. Management signaled $91–$93 billion capex for 2025 with unclear 2026 guidance. Depreciation and amortization rose 28% in fiscal 2024. R&D increased 22% to $15.15 billion in Q3, compressing operating margin to 30.5% due to infrastructure spending. Investors will monitor whether AI investments translate to sustainable margins rather than elevated costs.
Read at 24/7 Wall St.
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