Financial Trends -- 8/10
| Metric | FY2020 | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|---|
| Revenue | $182.5B | $257.6B | $282.8B | $307.4B | $350.0B | $402.8B |
| Revenue YoY | — | +41.1% | +9.8% | +8.7% | +13.9% | +15.1% |
| Net Income | $40.3B | $76.0B | $60.0B | $73.8B | $100.1B | $132.2B |
| Net Income YoY | — | +88.6% | -21.1% | +23.0% | +35.6% | +32.1% |
| Diluted EPS | $4.56 | $5.61 | $4.56 | $5.80 | $8.04 | $10.81 |
| EPS YoY | — | +23.0% | -18.7% | +27.2% | +38.6% | +34.5% |
| Free Cash Flow | $42.8B | $67.0B | $60.0B | $69.5B | $72.8B | $73.3B |
| FCF YoY | — | +56.5% | -10.4% | +15.8% | +4.7% | +0.7% |
| CapEx | $22.3B | $24.6B | $31.5B | $32.3B | $52.5B | $91.4B |
| CapEx YoY | — | +10.3% | +28.0% | +2.5% | +62.5% | +74.1% |
| Buybacks | $31.1B | $50.3B | $59.3B | $61.5B | $62.2B | $45.7B |
| Buybacks YoY | — | +61.7% | +17.9% | +3.7% | +1.1% | -26.5% |
| SBC | $13.0B | $15.4B | $19.4B | $22.5B | $22.8B | $25.0B |
| SBC YoY | — | +18.5% | +26.0% | +16.0% | +1.3% | +9.6% |
- Revenue grew from $182.5B to $402.8B over 5 years, a 17.2% CAGR. Growth re-accelerated from +8.7% (FY2023) to +15.1% (FY2025)
- Net income more than tripled from $40.3B to $132.2B, driven by operating leverage and margin expansion (gross margin 53.6% to 59.7%)
- EPS compounded at 18.8% CAGR, with 30%+ growth in both FY2024 and FY2025
- FCF grew modestly (+0.7% in FY2025) as CapEx nearly doubled to $91.4B -- but operating cash flow grew 31% to $164.7B
- Buybacks dropped 26.5% to $45.7B in FY2025 as capital was redirected to AI infrastructure spend
- SBC at $25.0B is ~6.2% of revenue, manageable and declining as a percentage of revenue
- Revenue growth bottomed at +11.8% in Q4 2024, then re-accelerated every quarter to +18.0% in Q4 2025
- Q4 2025 revenue of $113.8B was the first quarter above $100B, driven by Cloud (+48%) and Search (+17%)
- Gross margin remarkably stable in the 58-60% range across all 8 quarters
- EPS grew 30%+ YoY in every single quarter across the 8-quarter period
- Q1 2025 was the standout at +48.7% YoY ($2.81 vs $1.89), reflecting operating leverage and margin expansion
- Consistent 30%+ EPS growth alongside 12-18% revenue growth signals strong operating leverage
- FCF is lumpy quarter-to-quarter, ranging from $5.3B (Q2 2025) to $24.8B (Q4 2024)
- Q2 2025 FCF of $5.3B was compressed by the CapEx ramp hitting peak quarterly spend
- Second-half 2025 FCF recovered strongly: $24.5B in Q3 and $24.6B in Q4
| Segment | Q1 24 | Q2 24 | Q3 24 | Q4 24 | Q1 25 | Q2 25 | Q3 25 | Q4 25 |
|---|---|---|---|---|---|---|---|---|
| Search | $46.2B | $48.5B | $49.4B | $54.0B | $50.7B | $54.2B | $56.6B | $63.1B |
| YoY | +14.4% | +13.8% | +12.2% | +12.5% | +9.8% | +11.7% | +14.5% | +16.7% |
| YouTube Ads | $8.1B | $8.7B | $8.9B | $10.5B | $8.9B | $9.8B | $10.3B | $11.4B |
| YoY | +20.9% | +13.0% | +12.2% | +13.8% | +10.3% | +13.1% | +15.0% | +8.7% |
| Cloud | $9.6B | $10.3B | $11.4B | $12.0B | $12.3B | $13.6B | $15.2B | $17.7B |
| YoY | +28.4% | +28.8% | +35.0% | +30.0% | +28.1% | +31.7% | +33.5% | +47.8% |
- Search: Growth decelerated from +14.4% (Q1 2024) to +9.8% (Q1 2025) before re-accelerating to +16.7% in Q4 2025. AI Overviews are expanding the query TAM, not cannibalizing it
- YouTube Ads: Steady mid-teens growth through most quarters, with Q4 2025 slowing to +8.7% -- likely due to tough comps against Q4 2024 political ad spend ($10.5B)
- Cloud: The clear standout. Growth accelerated from +28.4% in Q1 2024 to +47.8% in Q4 2025, driven by AI workloads and $240B backlog. Cloud is now 15.6% of Q4 revenue, up from 11.9% a year ago
| Metric | FY2025A | FY2026E |
|---|---|---|
| Revenue | $402.8B | ~$465B |
| Rev Growth | +15.1% | ~15% |
| Diluted EPS | $10.81 | ~$11.47 |
| EPS Growth | +34% | ~6% |
| Analyst Rating | -- | Strong Buy (45 analysts) |
| Avg Price Target | -- | $351.53 (~19% upside) |
- Consensus expects revenue growth to sustain at ~15% in FY2026E, reaching ~$465B
- EPS growth slows sharply to ~6% despite 15% revenue growth -- the street is modeling CapEx-driven depreciation drag ($175-185B guided CapEx in 2026)
- This creates the key divergence: management sees every AI dollar earning a return, while the street models a compressed earnings year
- 45 analysts rate Strong Buy with an average price target of $351.53 (~19% upside from $295.77)
Alphabet delivered FY2025 revenue of $402.8B (+15.1% YoY) with growth re-accelerating through the year -- Q4 2025 hit +18.0%, the fastest quarterly growth rate in two years. EPS grew 34% to $10.81 on expanding gross margins (53.6% in FY2020 to 59.7% in FY2025), demonstrating significant operating leverage. Free cash flow held at $73.3B despite CapEx nearly doubling to $91.4B, which is only possible because operating cash flow surged 31% to $164.7B.
The segment story is powerful. Search revenue grew 13.4% to $224.5B, defying the narrative that AI would cannibalize the core business. Cloud was the standout at +36% for the full year, accelerating to +48% in Q4 2025 with a $240B backlog providing multi-year visibility. YouTube Ads contributed $40.4B in revenue with steady mid-teens growth.
The primary constraint on FCF is the massive CapEx cycle: $91.4B in FY2025 with $175-185B guided for FY2026. This is the largest infrastructure investment in corporate history and the single biggest risk to the financial profile. Buybacks declined 26.5% to $45.7B as capital was redirected to AI infrastructure. SBC at $25.0B (~6.2% of revenue) is manageable and declining as a share of revenue.
Score: 8/10 -- Revenue accelerating, margins expanding, EPS growing 30%+, FCF stable despite massive capex ramp. Slight ding for buyback reduction, flat FCF growth, and the uncertainty around $175-185B in 2026 CapEx returns.