Name: Breaking Down Alphabet's Earnings and Spending Plans
Uploaded: 2026-02-04T21:48:50+00:00
Duration: 414 s

Speakers

Scott Devitt — Equity Research Analyst, Wedbush

Summary

Scott Devitt of Wedbush discusses Alphabet's Q4 earnings and its much larger-than-expected 2025 capex plan. He argues the spending is justified by strong search and Google Cloud growth and remains positive on Alphabet, hyperscalers, and the broader AI ecosystem despite near-term free-cash-flow digestion. He also previews Amazon earnings, expecting AWS to accelerate as its AI laggard narrative shifts, and comments on Microsoft Azure and Apple's Gemini partnership.

Alphabet guided 2025 capex to $175-$185B, far above the $119.5B consensus.
Scott Devitt says Alphabet's capex is front-footed and justified by search and cloud growth.
Google Cloud grew 48% versus 38% expected and is approaching $100B in revenue.
Devitt remains positive on the broader AI ecosystem and infrastructure names.
He says recent data points for all hyperscalers are positive, though cycle longevity is debated.
Amazon AWS is described as an AI laggard whose narrative may shift with Project Rainier and Anthropic.
Microsoft cloud and Azure growth are cited as remaining strong.
Apple's Gemini/Siri tie-up is discussed as an extension of the Google-Apple search relationship.

Ideas

Scott Devitt Equity Research Analyst, Wedbush 0:31

Alphabet remains positive despite capex digestion.

Alphabet's much larger-than-expected 2025 capex plan ($175-$185B) creates a near-term digestion period for free cash flow and DCFs, but the spend is front-footed and justified by strong search growth (17%), Google Cloud growth of 48% versus 38% expected, cloud revenue approaching $100B in 2026, and early AI search monetization. Devitt sees it as very positive for Alphabet as a company and consistent with a five-to-ten-year AI investment cycle.

Scott Devitt Equity Research Analyst, Wedbush 0:57

AI capex cycle remains intact.

The massive hyperscaler capex, especially Alphabet's, shows the AI investment cycle is still intact and is positive for the broader AI ecosystem. He points to infrastructure names trading up after hours as evidence of that positive read-through.

Scott Devitt Equity Research Analyst, Wedbush 3:19

Azure and cloud growth remain strong.

Microsoft's cloud business is growing about 40% even though the results were not well received, and Azure should continue to grow at very high rates. That supports a positive fundamental view on Microsoft's cloud franchise.

Scott Devitt Equity Research Analyst, Wedbush 4:01

All hyperscalers show positive cloud data.

Cloud growth across the major hyperscalers is strong: Microsoft's cloud business is growing 40%, Google Cloud is growing almost 50%, and Amazon's AWS is growing in the mid-20% range on a $150B run-rate. Devitt says recent data points for all hyperscalers are very positive, even though the longevity of the revenue acceleration remains debated.

Scott Devitt Equity Research Analyst, Wedbush 4:20

AWS laggard narrative shifting on Anthropic.

AWS is the largest cloud provider with north of $150B in revenue this year and has been viewed as an AI laggard because it was later to adapt. However, Project Rainier, used exclusively by Anthropic, should drive meaningful AWS acceleration in 2026, and Devitt says the laggard narrative is already shifting.

Breaking Down Alphabet's Earnings and Spending Plans

Summary

Ideas

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