Alphabet's Q4 Earnings Preview: AI Momentum and Lofty Expectations

All eyes are on Alphabet Inc. (GOOG, GOOGL) as it prepares to unveil its fourth-quarter financial results this Wednesday. The tech behemoth's stock has been on a remarkable run, soaring over 80% in the past six months and recently touching a record high near $345. This rally sets a high bar for the upcoming earnings report, with the market parsing whether the company's fundamentals can justify its elevated valuation.

The narrative driving Alphabet is unmistakably centered on artificial intelligence. The November launch of its Gemini 3 model solidified its standing in the fiercely competitive AI arena. Beyond consumer-facing products, the company's strategic moves in AI infrastructure are drawing significant investor interest. A landmark, multi-billion dollar agreement with AI startup Anthropic, granting access to Google's custom Tensor Processing Units (TPUs), underscores the rising demand for its proprietary chips and opens a substantial new revenue stream.

Further bolstering sentiment are high-profile partnerships with industry titans like Apple and Walmart. While the financial impact of these deals will unfold over time, they signal Alphabet's expanding ecosystem reach and its ability to forge alliances that promise long-term growth.

Analysts anticipate another quarter of solid performance, underpinned by the core trio of Search, Cloud, and YouTube. Google Search continues to be the cash engine, with new AI features like AI Overviews enhancing user experience and engagement, which in turn supports advertising revenue. Google Cloud remains a powerhouse of growth, with revenue jumping 34% year-over-year in Q3 2025, fueled by voracious enterprise demand for AI infrastructure and services. The segment has secured a notable number of billion-dollar commitments this year, reflecting deep market penetration.

Within Cloud, AI adoption is accelerating at a breakneck pace. Over 70% of cloud customers now use Google's AI products, with generative AI revenue more than tripling. The success of Gemini Enterprise, which has attracted over two million subscribers, demonstrates Alphabet's growing foothold in the corporate AI productivity space.

Despite the strong fundamentals, caution flags are waving. The stock's 14-day Relative Strength Index (RSI) sits at a elevated 65.7, suggesting it is running hot. The options market is bracing for increased volatility, pricing in a potential post-earnings swing of about 5.3%—significantly higher than the average move of the past four quarters. This indicates traders expect a pronounced reaction, regardless of whether the news is positive or negative.

Wall Street expects earnings per share of $2.58, representing a 20% year-over-year increase. Alphabet has a history of surpassing estimates, but the recent parabolic stock rise implies that much of the optimism is already baked into the current share price. The consensus price target of approximately $346 suggests limited immediate upside, presenting a classic "sell the news" risk even with a strong report.

Market Voices: A Range of Perspectives

David Chen, Portfolio Manager at Horizon Capital: "Alphabet is executing flawlessly across its three key pillars. The cloud business, in particular, is transitioning from a cost center to a major profit driver, and the AI monetization across Search and Workspace is still in its early innings. The valuation, while not cheap, is justified by the quality and durability of these earnings streams."

Rebecca Shaw, Senior Tech Analyst at ClearView Research: "The fundamentals are undoubtedly strong, but the risk-reward is becoming less attractive. The stock's massive run-up has left little room for error. Any hint of slowing cloud growth or margin pressure from heavy AI investments could trigger a sharp correction. The market is priced for perfection."

Marcus Thorne, Independent Market Commentator: "It's pure euphoria. Everyone's chasing the AI hype train, ignoring the regulatory headwinds, massive capital expenditures, and the fact that much of this 'AI revenue' is still fuzzy accounting. This stock is a coiled spring—on the downside. A modest earnings beat won't save it from a brutal re-rating when sentiment shifts."

Priya Mehta, Chief Investment Officer at Steadfast Advisors: "For long-term investors, quarterly volatility is noise. Alphabet is arguably the best-positioned company to monetize the AI revolution through its search dominance, cloud scale, and ubiquitous platforms like YouTube. Short-term price targets are irrelevant when you're looking at a 5-10 year horizon of embedded growth."

Disclosure: The simulated individuals quoted above are for illustrative purposes only. On the original publication date, the author held no positions in the securities mentioned. All information is for informational purposes.