A clear message was delivered during Alphabet Inc.’s recent earnings call: competition in the field of artificial intelligence is intensifying. Although the company’s fourth-quarter results surpassed market expectations across the board, its disclosed capital expenditure guidance for 2026, reaching as high as $175 billion to $185 billion, has drawn widespread investor attention. Concerns over the potential depreciation pressure from such massive capital spending and its possible impact on profit margins have unsettled the market, leading to a slight decline in the company’s stock price during after-hours trading.
In response to investor doubts, CEO Sundar Pichai and CFO Anat Ashkenazi elaborated on the necessity of the high capital expenditure, the commercialization prospects for AI agents, and confirmed the collaboration with Apple Inc.
Regarding the massive capital expenditure, management emphasized that it is a forward-looking strategic investment. Anat pointed out that capital expenditure in 2026 is expected to grow quarter by quarter, with approximately 60% allocated to server investments and the remaining 40% to long-term assets such as data centers and networking equipment. She also noted that, with increased infrastructure investment, depreciation expenses will rise significantly and exert ongoing pressure on the income statement. Pichai further explained that this spending is primarily aimed at supporting the cutting-edge model research and development by Google DeepMind and meeting the rapidly growing demands of cloud customers. He acknowledged that computing power supply remains tight and that the company expects to operate under supply constraints throughout the year.
Addressing market concerns that AI might disrupt traditional software business models, Pichai expressed a different view. He emphasized that Google is a partner to software-as-a-service companies, not their disruptor. Pichai officially confirmed the deep collaboration with Apple during the call. He stated that Google will serve as Apple’s preferred cloud provider and assist in developing its next-generation foundational model based on Gemini technology. This collaboration is seen as a crucial step to consolidate Google’s position in the mobile ecosystem.
Regarding the commercialization of AI, Pichai revealed that the monthly active users of Gemini applications have surpassed 750 million. Since the launch of Gemini 3 in December last year, user engagement has significantly increased. The company is actively building new business models based on “AI agents,” such as promoting the “Universal Commercial Agreement” as an open standard, marking a shift in the business from information retrieval to task execution. Pichai stated that 2025 will focus on laying the groundwork to make models more robust for agent use cases, with consumers expected to widely experience related applications by 2026.
When asked whether Gemini applications might erode traditional search traffic, Pichai denied this, calling the current moment an “expansive period.” He explained that users utilize search, AI overviews, and Gemini applications simultaneously, collectively expanding the types of queries users conduct through Google. He revealed that in the U.S. market, the number of daily AI-powered queries has doubled since the launch of relevant features, and their average query length is three times that of traditional searches.
