Robust earnings overshadowed as software and AI stocks plunge, leaving advisors to rethink tech exposure
Alphabet’s latest quarterly results capped a strong finish to 2025, but the upbeat numbers have landed in a market gripped by growing anxiety over technology stocks, leaving investors and financial advisors weighing solid fundamentals against sharp sector-wide declines over the past day.
After the closing bell Wednesday, Alphabet reported fourth-quarter revenues of $113.8 billion, an 18% increase from a year earlier, with strength across Google Services and Google Cloud. Net income rose to $34.5 billion, pushing diluted earnings per share up to $2.82.
For the full year, the company surpassed a major milestone, highlighting its scale and cash-generating power even as markets grow more selective about growth stocks.
“It was a tremendous quarter for Alphabet and annual revenues exceeded $400 billion for the first time,” said Sundar Pichai, CEO of Alphabet and Google. “The launch of Gemini 3 was a major milestone and we have great momentum. Our first party models, like Gemini, now process over 10 billion tokens per minute via direct API use by our customers, and the Gemini App has grown to over 750 million monthly active users. Search saw more usage than ever before, with AI continuing to drive an expansionary moment.”
Alphabet also emphasized its long-term commitment to AI, outlining a sharp increase in capital spending. The company said it expects capital expenditures of $175 billion to $185 billion in 2026, nearly double the roughly $92 billion spent in 2025, as it builds out data centers, servers and AI infrastructure.
The scale of that investment reflects confidence in long-term opportunity, but it has also added to investor unease about near-term returns and rising costs across the tech sector.
That unease has been visible in markets over the past 24 hours, as technology and software stocks have come under heavy pressure. Major tech-heavy indexes have lagged broader benchmarks, extending a selloff that has accelerated this week. Software stocks in particular have been hit hard, with investors reassessing valuations after years of outsized gains and grappling with how generative AI could disrupt existing business models.
Reuters described the rout as a “software-mageddon,” noting that the S&P 500 software index has fallen roughly 13% over the past week, erasing hundreds of billions of dollars in market value. While some investors have begun bargain hunting, many remain cautious, concerned that AI could compress margins or upend pricing power for established software companies faster than previously expected.
The pullback has unfolded even as some of the largest technology companies, including Alphabet, continue to post strong earnings. That disconnect has become a central theme for investors: fundamentals remain solid at the top end of the sector, but sentiment has shifted as markets focus on future risks rather than recent results.
The Wall Street Journal’s live market coverage early Thursday showed tech stocks weighing on broader indexes, with traders pointing to profit-taking, rising uncertainty around AI economics and concerns about capital intensity.
CNBC has also highlighted the tension, noting that software is experiencing “one of its most exciting moments” as AI accelerates innovation, even as stocks are being “hammered” by fears that new tools could disrupt incumbents faster than they can adapt. That paradox has made positioning more difficult for investors accustomed to treating software and big tech as relatively defensive growth allocations.
As earnings season continues, investors will be watching not only revenue and profit trends but also commentary around AI spending, competitive pressures and return on investment. The coming weeks may determine whether the recent selloff proves to be a temporary reset or the start of a more prolonged re-rating of technology stocks in an AI-driven market.
