Google’s Comeback: Alphabet Storms past OpenAI Skeptics as Gemini 3 Fuels Booming AI Growth

With input from Reuters, the Financial Times, Forbes and CNBC.

Alphabet showed up to the AI race with swagger this week, and Wall Street noticed.

On Wednesday’s post-earnings call — the first since Google rolled out Gemini 3 — executives sounded a lot more sure of themselves than they did a year ago, when investors pegged the company as lagging behind AI rivals and punished the stock. Now the story is flipped: Alphabet is being talked about as a leader, with AI investments finally starting to pull through across the business.

“Overall, we’re seeing our AI investments and infrastructure drive revenue and growth across the board,” CEO Sundar Pichai said, pointing to what he called clear gains in both consumer and enterprise businesses.

Google’s Gemini app hit about 750 million monthly active users at the end of the December quarter — up from 650 million — and Pichai said engagement per user has jumped since Gemini 3 launched. For context, OpenAI’s ChatGPT was said to have topped 800 million weekly active users back in October.

Gemini 3 is now baked into Google Search’s “AI Mode” and powers the enterprise version of Gemini, which Pichai said has about 8 million paid licenses. That momentum helped Alphabet beat expectations: quarterly revenue of $113.8 billion and EPS of $2.82, with annual revenue crossing $400 billion for the first time ($402.8 billion).

The wins haven’t come cheap. Alphabet surprised investors by flagging a potential doubling of capital spending next year — forecasting $175 billion to $185 billion in capex for 2026 after spending $105.7 billion in 2025 — to bulk up AI compute capacity. That initial capex shock sent shares lower in after-hours trading, but the market quickly steadied when results showed Google Cloud booming (revenue up 48% to $17.7 billion) and AI-driven gains across Google Services.

That mix of heavy spending plus visible revenue traction is exactly what investors have been waiting for: big AI bets that actually show a return.

“This time last year, every announcement by OpenAI to do business with somebody was applauded,” Paul Meeks of Freedom Capital Markets said — but late-2025 sentiment shifted as investors fretted about how much revenue and infrastructure exposure other companies have tied to OpenAI.

Meanwhile, Alphabet’s stock has climbed roughly 36% over the period, and the market is rewarding the company for both scale and apparent self-sufficiency.

Alphabet’s recent deals — including partnerships to power Meta and Apple products and infrastructure — have filled its war chest. That’s helped the company sit shoulder-to-shoulder with Nvidia and Apple among the handful of firms with market caps above $4 trillion, and brought it within striking distance of Nvidia as one of the world’s biggest companies.

Analysts still see risk. OpenAI is signing multibillion-dollar deals even as it runs at a loss, which makes some investors nervous about the funding behind those contracts. Firms with heavy ties to OpenAI, like Oracle and Microsoft, have seen rough patches in their share prices, while Alphabet has so far enjoyed a more positive narrative.

Bottom line: Alphabet’s message is straightforward — build big AI infrastructure, ship improvements that users love (hello, Gemini 3), and the money will follow. The market seems willing to buy that thesis for now, as long as the AI spending keeps producing measurable returns.