Alphabet’s AI investments drive revenue across its business, with the Gemini app reaching 750 million monthly users as it closes the gap on ChatGPT.
SAN FRANCISCO: Alphabet has transformed from an AI laggard to a perceived leader, a stark reversal from a year ago when investors punished its stock for falling behind rivals.
Executives struck a newly confident tone on the company’s post-earnings call, the first since the release of its impressive Gemini 3 model.
The messaging emphasised a key contrast: its massive AI investments are now generating returns across the entire company.
“Overall, we’re seeing our AI investments and infrastructure drive revenue and growth across the board,” CEO Sundar Pichai said.
This growth justified a forecast to potentially double capital expenditures in 2026 to between USD 175 billion and USD 185 billion for AI computing capacity.
Google’s conviction is backed by growth in both consumer and enterprise businesses.
The Gemini app, which competes with ChatGPT, exceeded 750 million monthly active users at the end of December, up from 650 million in the prior period.
It still trails ChatGPT, which OpenAI CEO Sam Altman said in October had eclipsed 800 million weekly active users.
“We are also seeing significantly higher engagement per user, especially since the launch of Gemini 3,” Pichai added.
Gemini 3 has been integrated into Google Search and powers an enterprise version with 8 million paying licenses.
The surging capex forecast initially alarmed investors, sending the stock down as much as 6% in after-hours trading.
Strong cloud unit revenue, up 48% in the December quarter, and an AI-powered boost across its business quickly restored Wall Street’s confidence.
This validated the market’s message that soaring AI spending must demonstrate commensurate financial returns.
The stock was down 3% in premarket trading on Thursday after rising 65% last year and gaining 6% so far in 2026.
Since last year, Alphabet has gone from laggard to leader among megacap firms, now matched only by Nvidia and Apple in market capitalisation above USD 4 trillion.
Microsoft’s shares took a beating last week partly due to concerns over its reliance on OpenAI, despite a modest spending tone.
Investors have grown concerned about OpenAI’s ability to finance its string of multi-billion-dollar deals while still losing money.
This has soured sentiment around major tech firms with close links to the startup.
Paul Meeks of Freedom Capital Markets said Alphabet benefits from a contrast in sentiment despite an “eye-watering” capex forecast.
“I do think there’s a narrative emerging here where the market is favoring Google versus OpenAI,” Meeks said.
He noted that OpenAI deals were once applauded but now raise concerns about over-reliance.
Shares of Oracle, whose contract backlog hinges largely on OpenAI, are down about 49% since October.
Microsoft, which holds a 27% stake in OpenAI, has slid more than 20% over the same period.
Meanwhile, Alphabet has jumped about 36%.
“The deals that OpenAI has with Microsoft and Oracle are highly tied to their ability to raise future funds,” said Dan Morgan of Synovus Trust.
Alphabet’s deep war chest has been filled by major deals to power products at tech firms like Meta and Apple.
“If you are software and you are connected to OpenAI, you’re doubly not intriguing to people. Right now, Google has the hot hand,” said Eric Clark, portfolio manager of the LOGO ETF.
