Alphabet Surges With AI Growth Amid Rising Ad Costs

Alphabet Inc., the parent company of Google, has once again demonstrated its resilience and adaptability in an era where artificial intelligence (AI) is reshaping the digital landscape. The company’s latest quarterly earnings, released on February 4, 2026, showed that Google’s dominance in online search and advertising is not only intact, but is thriving amid the AI revolution that’s sweeping the tech world. But as advertising costs climb and privacy laws evolve on both sides of the Atlantic, the rules of the game are changing for everyone involved in digital marketing.

For the fourth quarter of 2025, Alphabet reported a profit of $34.5 billion, or $2.82 per share—a remarkable 30% increase compared to the same period last year. Revenue also soared, climbing 18% to $113.8 billion. The company’s digital ad sales, the lifeblood of its business, reached $82.3 billion in the quarter, a 14% year-over-year jump. Meanwhile, Google Cloud, which powers much of the company’s AI infrastructure, posted $17.7 billion in revenue, up a staggering 48% from the previous year, according to the Associated Press.

This surge in performance has fueled Alphabet’s stock price, which has risen nearly 60% in just five months, pushing the company’s market value to a jaw-dropping $4 trillion. That puts Alphabet in rarefied air alongside Apple, another tech titan with a $4 trillion valuation. The two companies are even collaborating: Apple recently struck a deal to use Google’s Gemini AI technology in a long-awaited upgrade to Siri, its virtual assistant, as reported by AP.

“Search saw more usage than ever before, with AI continuing to drive an expansionary moment,” said Alphabet CEO Sundar Pichai. His words echo the sentiment that Google’s evolution is not just about surviving the AI era, but thriving in it. The company is embedding more of its Gemini AI into its dominant search engine, Gmail, and Chrome browser, a move designed to fend off rising competitors like OpenAI, Anthropic, and Perplexity.

But this transformation isn’t coming cheap. Alphabet has already poured $91 billion into capital expenditures, mostly to expand its AI capacity. And that’s just the beginning. The company disclosed it plans to double down, budgeting between $175 billion and $185 billion in capital expenditures for 2026. To put that in perspective, Alphabet’s annual capital expenditure hovered around $30 billion before 2022. Now, its projected budget represents nearly half of its anticipated 2025 revenue of $403 billion.

Some investors are understandably jittery about whether Google can sustain the kind of growth needed to justify such eye-popping investments. Alphabet’s shares wavered between slight gains and losses in after-hours trading following the earnings announcement. Yet, as Thomas Monteiro of Investing.com pointed out, the recent results “support the view that Google is spending into strength and differentiation, not spending to stay relevant.”

While Google’s financial might and technical prowess are clear, the digital advertising ecosystem in which it operates is facing a period of profound change—one driven not just by technology, but by evolving privacy expectations and regulations around the globe. According to a recent analysis by Clym, online advertising costs are rising across major platforms like Google, Facebook, and LinkedIn in the U.S. as of early 2026. At the same time, these platforms are turning more and more to automation and AI to allocate campaign budgets and optimize results.

Europe has already taken a major leap forward in reshaping how advertising data is collected and used. Driven initially by privacy regulations, European platforms now require websites to send verified consent signals to maintain reliable campaign measurement. Google’s introduction of Consent Mode V2 and Microsoft’s similar Consent Mode allow platforms to adjust measurement and optimization based on user consent, rather than losing visibility entirely. Global Privacy Control (GPC) has also emerged as a universal opt-out mechanism in certain jurisdictions, obliging websites to honor user opt-out signals automatically, without any manual steps required from the user.

These changes aren’t just bureaucratic hurdles—they’re fundamentally altering how advertising platforms operate. For any U.S. business running ads that reach European users, meeting these technical standards is now essential for accurate campaign delivery, audience targeting, and conversion measurement. If a company fails to provide verified consent signals, its targeting and reporting for European traffic can be severely limited or even distorted.

And while the U.S. as a whole hasn’t yet adopted Europe’s stringent requirements, the writing is on the wall. Several states, including California, Colorado, Virginia, and Connecticut, have enacted privacy laws that require websites to honor opt-out consent signals. As Clym notes, this is pushing U.S. businesses to adopt the same kind of consent management infrastructure that’s now standard in Europe. Treating privacy compliance and advertising performance as separate challenges is a recipe for fragmented tools, manual work, and unreliable reporting.

Consent management platforms have become critical tools in this new environment. They do much more than display a cookie banner—they record and store user choices, block or enable scripts based on regulations and visitor preferences, and send structured consent signals to advertising and analytics platforms. With these systems in place, platforms can adapt their measurement strategies responsibly, maintaining visibility and performance without running afoul of privacy laws.

This model, already the norm in Europe, closely mirrors the direction of U.S. state-level privacy regulations. Digital compliance companies point out that as more states follow GDPR-style frameworks, consent handling is becoming an integral part of the technical infrastructure behind advertising systems—not just a legal box to check.

For businesses, the implications are clear: preparing for these changes now is far preferable to scrambling when enforcement tightens. As Clym’s analysis puts it, “This isn’t about fixing broken campaigns today. It’s about preparing for how advertising platforms are changing.” U.S. businesses already need consent infrastructure to meet state privacy laws, and adopting solutions that also support advertising signals can reduce manual work, avoid costly retrofits down the line, and help protect long-term campaign efficiency.

Meanwhile, the legal and regulatory clouds continue to swirl around Google. In 2024, a federal judge condemned Google’s search engine as an illegal monopoly in a high-profile case brought by the U.S. Justice Department. The proposed remedy—a breakup that would have forced Google to sell its Chrome browser—was rejected by U.S. District Judge Amit Mehta. Instead, the judge ordered less severe changes, citing the rise of AI as a factor that could help rein in Google’s dominance. Both the Justice Department and Google are now appealing that decision, leaving the company’s long-term regulatory outlook uncertain.

As Alphabet continues to push the boundaries of AI and digital advertising, it finds itself at the intersection of innovation, competition, and regulation. The company’s latest results show that it’s spending aggressively to secure its future in a world where AI and privacy concerns are reshaping the rules. For businesses and advertisers, the message is clear: the future of online advertising will be shaped as much by compliance and consent as by algorithms and data.