Google parent Alphabet shares are down premarket after its earnings beat. Here's what's happening

Shares of Alphabet, the parent company of Google, experienced a decline in premarket trading on Tuesday, falling 2.6% at 6:09 a.m. ET. This dip came despite the company surpassing Wall Street's expectations for both earnings and revenue, with a notable surge in projected spending on artificial intelligence this year. In its latest earnings report, Alphabet revealed a revenue of $113.83 billion for the fourth quarter, exceeding analysts' estimates of $111.43 billion. The Google Cloud division contributed significantly with $17.66 billion in revenue, outpacing the forecast of $16.18 billion. However, YouTube Advertising reported $11.38 billion, slightly below the anticipated $11.84 billion. Looking ahead, Alphabet announced plans to ramp up its capital expenditure for 2026 to between $175 billion and $185 billion, more than doubling its 2025 spending. A considerable portion of this investment is earmarked for boosting AI compute capacity, particularly for Google DeepMind. Analysts from Barclays noted that costs associated with Infrastructure, DeepMind, and Waymo are impacting Alphabet's profitability, a trend expected to continue into 2026. They emphasized that the growth of the cloud segment is impressive across various metrics, including revenue and enterprise adoption of Gemini, which justifies the substantial increase in capital expenditure. Meanwhile, Deutsche Bank analysts remarked on the ambitious capital expenditure plans, highlighting the unpredictability of the tech landscape and questioning whether this strategy is advantageous or potentially risky for the company.