The Google parent said revenue rose 18 per cent year-on-year in the quarter, while profit reached $34.5 billion. Cloud revenue surged 48 per cent to $17.7 billion, reinforcing its role as a key growth engine alongside Google’s core search and advertising business.

Despite the gains, Alphabet signalled that spending will rise sharply. The company expects capital expenditures of between $175 billion and $185 billion in 2026—nearly double its 2025 investment—as it races to expand AI infrastructure.

“We’ve been supply-constrained even as we’ve been ramping up our capacity,” chief executive Sundar Pichai said, noting that demand for AI services continues to outpace available computing power.

Google’s Gemini AI ended the year with 750 million monthly active users, up by 100 million from the previous quarter, as AI features drove increased engagement across Search and other products.

Advertising remained Alphabet’s largest revenue source, generating $82.3 billion during the quarter, while YouTube ad revenue climbed to $11.4 billion. The company also reported more than 325 million paid subscriptions across consumer services such as YouTube Premium and Google One.

Alphabet shares dipped slightly in after-hours trading, even as analysts highlighted the company’s strong cash flow advantage in funding AI expansion.

Meanwhile, Alphabet’s “Other Bets” division posted a loss of $3.6 billion, though autonomous driving unit Waymo raised $16 billion in new funding, valuing the subsidiary at $126 billion as it scales its self-driving ride services across major U.S. cities.

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The Google parent’s shares rose as much as 1.7% to a record high before paring gains. The rally followed news that Apple will base the next generation of its AI models on Google’s Gemini technology under a multi-year agreement.

Alphabet has also benefited from growing adoption of Gemini across the smartphone market. Samsung Electronics plans to double the number of mobile devices using Gemini-powered AI features this year, according to a previous Reuters report.

The company last week overtook Apple in market capitalisation for the first time since 2019, becoming the world’s second most valuable publicly listed firm. Alphabet’s stock has gained about 65% so far this year, outperforming other members of the so-called “Magnificent Seven.”

The turnaround reflects improved sentiment toward Alphabet’s cloud business, which has emerged as a major growth driver, as well as increased demand for its AI models and custom-built chips. Reports have also said Meta Platforms is in talks to spend billions on Google’s AI chips starting in 2027.

Alphabet’s advertising business has remained resilient despite economic uncertainty, further supporting its valuation. The company is the fourth to cross the $4 trillion milestone, after Nvidia, Microsoft, and Apple.

Investor confidence has also been buoyed by a U.S. court ruling last year that allowed Alphabet to retain control of its Chrome browser and Android operating system, easing regulatory concerns around a potential breakup.

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The losses — spanning Nvidia, Microsoft, Meta, Broadcom, Oracle, TSMC, AMD, Palantir, Apple and ASML — rattled markets globally, given the companies’ central role in the AI hardware and software supply chain. The sell-off erased an amount nearly equivalent to the entire Spanish stock market and almost half the market capitalisation of Canada.

Nvidia saw the steepest decline, shedding roughly $459 billion, followed by Microsoft ($333 billion) and Meta ($321 billion). Broadcom lost an estimated $173 billion, while Oracle, TSMC, AMD, Palantir, Apple and ASML recorded declines ranging from $21 billion to $102 billion.

The downturn came amid a broader tech-sector slump as investors reassessed whether the nearly two-year surge in AI-linked valuations had overshot fundamentals. Analysts pointed to a series of catalysts behind the sudden reversal. Alphabet’s reported push to supply its home-grown TPUs directly to major customers, including Meta, intensified concerns about rising competition in the AI chip market. Washington’s decision to further tighten export controls on advanced processors bound for China added additional pressure on chipmakers and manufacturing partners.

The sell-off was further fuelled by profit-taking after significant gains, as well as renewed questions about whether massive AI-related capital expenditure will translate into near-term earnings. Some AI software firms, including Palantir, had recently signalled slower-than-expected contract growth, adding to investor unease.

Despite the declines, all ten companies remain among the world’s most valuable corporations, reflecting the continued strategic importance of AI computing infrastructure. The episode underscored, however, how concentrated global equity markets have become; with mega-cap AI stocks now representing an outsized share of major indices, volatility in a handful of companies can move markets worldwide.

Within weeks of the sell-off, Nvidia’s stronger-than-expected quarterly results helped stabilise sentiment, though analysts say the correction served as an early reminder of the risks that accompany rapid technological transitions and elevated valuations in the AI sector.

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