In case you missed it:

The cloud backlog grew by 55% Q/Q (100% Y/Y) to $240B. Importantly, contracted Anthropic compute is a big piece of the large jump, but Alphabet was careful to mention a few times that it was driven by a “wide breadth of customers.” That's nice, but Anthropic was still $50-$60B of the ~$86B increase. That’s not the same thing as getting nearly half of your entire cloud backlog from OpenAI like Microsoft does. Anthropic is relatively more fiscally responsible than its aggressive rival and not throwing out giant spend commitments left and right. Still, they are burning a lot of cash and this does create more concentration risk.

EBIT included $2.1B in compensation related to the Waymo investment round. This was part of operating expenses (OpEx). Excluding the item, EBIT beat estimates by 3%. At the same time, equity investments boosted net income by $2.3B. Excluding both of those items, EPS would have beaten estimates by $0.16 instead of $0.18. The Waymo charge led to sharp R&D growth and OpEx growth of 29% Y/Y. 21% G&A growth was also elevated, but that was due to charitable donation timing.

2026 CapEx guidance at $180B was 50% ahead of $120B consensus estimates. This represents 100% Y/Y growth vs. 2025. This likely means Alphabet will generate very little 2026 FCF, considering operating cash flow estimates are $188B for the year. They’re currently expected to do $72.2B in 2026 FCF and I think those estimates are going to plummet. This is making Meta look conservative. Hard to do right now. Just like the other mega-caps, the massive spend is to support fantastic demand signals for their cloud services, address supply scarcity and alleviate future growth bottlenecks. About 60% is for servers and 40% is for data center buildings and networking equipment.

Depreciation expense for the full year will by faster than 38% Y/Y in 2025 due to hefty CapEx investments over the last few years.

Google trades for 31x forward EPS vs. 17x last year. EPS is expected to grow by 4% this year and by 15% next year. It has quickly gotten quite expensive in the last 12 months.

Search:

The pace of innovation for Google’s suite of search products remains excellent, as it shipped 250 products across AI Mode and AI overviews during the quarter. The updates included integrating Gemini 3 and making the transition from overviews to AI mode easier. So far, these items have fostered a doubling in AI mode queries per user, spearheaded more complex and lengthy user sessions and delivered more multimodal consumer inputs. 

Cloud & AI:

Everything is going well for this segment. Their pace of contract wins exiting 2025 was double the start-of-year pace. They signed more $1B deals in 2025 than they did in all of 2022-2024 and fortified relationships with existing customers. These customers consumed 30% more than initial commitments and provided considerable revenue upside for the segment.

At the core of all this momentum is their full stack AI approach. 75% of cloud customers are using this overarching product umbrella of its infrastructure, models, tools, agents and apps. And they're not just buying products and experimenting... they're meaningfully ramping usage. It now has 350 customers processing 100B or more tokens per month on average, which is the equivalent of about 150M pages of text every 30 days. It will merely scale from there. 

When looking across the 3 layers of the AI stack (infrastructure, research/models, apps) progress is uniformly encouraging. On the infrastructure side, perpetual optimization work led to 78% efficiency gains for Gemini unit costs throughout 2025. You may hear that and wonder “Ok, so what do they need $60B more in 2026 CapEx than analysts expected?” Totally fair. They’re not interested in leveraging added efficiency via keeping compute needs stable and pocketing savings. They’re happy to forgo this near-term savings to turn efficiency into an ability to add more connected compute with the same budget. They see these investments already greatly benefitting their ad core business (better targeting) and they're also proving they can create new cloud revenue streams that rapidly grow as well. Confidence in these investments coming with high returns is building thanks to this concrete evidence and demand signals. They’re adamant that having more compute than competition will be an edge and so they’re leaning in.

Gemini Enterprise now has 8M paid seats across 2,800 customers. This tier managed 5B customer interactions in Q4, which represents 65% Y/Y growth and is only the beginning. Overall, Gemini 3 Pro has enjoyed 3x the average traffic of 2.5 Pro since launch. The leading LLM family is now up to 10 billion tokens processed per minute vs. 7B Q/Q and the Gemini app reached 750M monthly users vs. 650M Q/Q and 350M 10 months ago. Good progress here.

While token, seat and interaction growth sound cool, we love revenue and profit. What do token inputs represent in that arena? This cloud-based token momentum coincided with 400% Y/Y growth in Gemini-powered Google AI products, which marks a “significant acceleration from last quarter.” These numbers are still small, but that will not be true for long if this keeps up. Furthermore, products built on its platform by 3rd-parties rose by 300% Y/Y and commitments from their 15 largest software partners rose 16x Y/Y. They’re consistently taking market share in GenAI traffic (chart below) and steadily improving their ability to turn impressive AI key performance indicators into financial results. 

YouTube:

YouTube has been the top streamer in the USA for 3 straight years, and is finding nice activity with a cheaper sports package early on. They plan to build on this with 10 additional genre-specific packages that will be released in the coming months. Traction for its brand marketing campaign product (Demand Gen) was a notable highlight and benefited from especially good adoption from larger customers. Shoppable ads on YouTube are boosting monetization and yielded great performance throughout the holiday season. Furthermore, ongoing work to harvest more value from YouTube Shorts’ 200B daily views is bearing fruit. Alphabet is monetizing better than traditional YouTube ad formats in many markets including the USA.

More on Ad Tools:

On the ad quality front, Alphabet is hard at work on bolstering ad relevancy to improve targeting and returns. They’ve added Gemini 3 across all of their ad ranking algorithms and are enjoying things like lower irrelevant ad rates as a result. For advertisers, campaign building is now more conversational and guided with data-driven recommendations on how to maximize returns. Together Performance Max (optimize bottom-of-funnel conversions) and AI Max (upgraded search campaign design) are helping:

This explains is why AI Max has crossed 200,000+ customers and is its “fastest-growing AI-powered Search ads product.” Finally, on the monetization front, they’ve started testing AI mode ads and launched Direct Offers for businesses to show products to shoppers intending to buy something through AI mode. This leans heavily on the universal commerce protocol Google carefully built throughout 2025. That project laid the foundation for future agentic commerce scaling, while tools like this one will help ensure that scaling is as large as possible.

Other:

Another good quarter. The profit miss is due to the Waymo investment and demand across its major buckets looks excellent. The 2026 CapEx guidance is a tough pill to swallow, but they have clear reasons for aggression and are showing obvious signs that these investments will come with strong returns. Just like I think Meta and Zuck should be going for it, Alphabet and Sundar should be as well. More compute infrastructure will enable more powerful product design and profound value creation. It will strengthen their long-term competitive positioning and lengthen their growth runway. They are determined to capture that future and must spend today to do it. I can live with that for an elite company like this one.

Ad revenue rose 50% Y/Y to cross $2B annualized. It’s still early stages here, with enterprise adoption now ramping and new integrations with partners like LiveRamp improving available campaign tools.

Mobility Notes:

For Q1, bookings guidance beat estimates by 2.6%. The guidance represents 19% constant currency (CC) growth compared to 22% growth this quarter and 17% growth during Q1 2025. EBITDA guidance missed estimates by 1.6% & $0.685 EPS guidance missed estimates by 13%. EPS was weaker vs. consensus for Q4 and Q1 guidance than any other metric Uber reports. That makes me think analysts had some difficulty modeling stock comp and other assumptions for this new metric. This large EPS miss does not bother me much, considering the modest EBITDA miss and the strong demand forecast. They’re well on their way to achieving the 3-year targets they set at the 2024 Investor Day.

It sounds like they’ll stay very aggressive with buyback for the time being. They view their stock as very cheap and will be “shrinking the share count by a healthy amount” going forward. They comfortably have the flexibility to do this and fund growth.

Uber trades for 22x forward EPS. EPS is expected to grow by 39% this year, 27% the year after and 20% the year after that.

CFO Change:

Uber’s CFO Prashanth Mahendra-Rajah is leaving after just two short years with the company. He’s great at his job and will be missed. It sounds like he got a great opportunity somewhere else, so congratulations to him. 

“A new opportunity presented itself where I could serve America and give back to the country that has given me and my family so much… Uber is a once-in-a-generation company. It's dynamic, fast-moving, and innovative, and I have loved every moment of my time here. I am extremely bullish about its future.” – CFO Prashanth Mahendra-Rajah 

He will be replaced by Balaji Krishnamurthy, who has been with Uber for 6 years and is currently the VP of Strategic Finance. When profitable growth looks this great… no need to fix anything. I’m a fan of the internal hire. 

A Detailed Update on the AV Landscape – Overview:

Last year, Uber offered investors a deep dive into their take on the AV market, their expected plans and perceived positioning. One year later, after many AV deployments have taken place within their network and outside of it, Uber is “more convinced that AVs will unlock a multi-trillion dollar Uber opportunity.” Still, leadership heard the investor skepticism and was ready to combat it. Dara spent most of his prepared remarks walking through several things he thinks investors are missing.

“Autonomy fundamentally amplifies the strengths of our existing platform: global scale, deep demand density, sophisticated marketplace technology, and decades of experience matching millions of trips in real time.” – CEO Dara Khosrowshahi

A Detailed Update on the AV Landscape – Misconception #1:

First, he reiterated previous arguments that AVs are not a zero-sum game – with some encouraging new data to back this up. Austin and Atlanta are two of the U.S. cities furthest along in AV scaling, and are also two of Uber’s fastest-growing cities in the USA. Even in cities like San Francisco, where Uber has no AVs on its network, Uber trip growth there accelerated throughout 2025. Driver earnings per hour also continue to grow nicely Y/Y. And again, as AV deployments rapidly grow in 2026, Uber expects the U.S. mobility market to accelerate for volume and trips while also expanding Y/Y margins. This is driven by continued insurance deflation allowing them to pass more savings onto customers and strong underlying trends. So… the market and geography that skeptics are most worried about will accelerate for another year as AV competition ramps. 

Any time Uber adds more supply, service improves and volume growth accelerates. It expects AVs to be more of the same, as these companies augment its TAM while many are assuming the opposite.

From their slide deck

A Detailed Update on the AV Landscape – Misconception #2:

Second, scaling across cities is not nearly as uniform as people think. There is no monotonous template to use because cities, their designs and their regulatory climates are all so different. In San Francisco, affluence, tech-forward culture, rules, weather and other variables make it the perfect city to quickly take AV market share. And despite Uber accelerating in that market, some are still worried this will hurt them long-term. They’re confident in being highly competitive in San Francisco for the long haul and thanks to AVs. And they’re also increasingly upbeat on having more time for competition to proliferate than most believe. For evidence, average AV trip volume in Los Angeles is half of San Francisco, despite AVs being 20% cheaper than an UberX in LA and 15% more expensive in San Francisco. The rest of the country looks like LA from an adoption curve or regulatory standpoint, which will require operators to find 3rd-party solutions to optimize volume. Uber is the best solution.

A Detailed Update on the AV Landscape – Misconception #3

The third item relates closely to the second. Some believe fleet operators don’t need Uber for reliable utilization. 

Dara thinks they’re wrong, and I agree. As they reminded shareholders, ride demand violently fluctuates through the week (45% dip from Saturday to Monday). These vehicles are very expensive to make and several new competitors will soon be vying for market share. To take as much share as they can, companies will need to have reliably visible utilization metrics that make these machines profitable. Otherwise, nobody is going to fund these buildouts. Without this certainty, fleet sizes would be much smaller. Otherwise, they’d be sitting empty most of the day and incinerating cash. 

From their slide deck

Uber is the answer to both the usage maximization objective and the visibility needs. They will be able to fill more cars beyond peak supply needs and will free fleet operators to build more units and larger businesses. That’s the beauty of Uber’s massive customer base and the constant demand visibility that brings. And? That’s why it will be able to profitably pay these fleet operators more than anyone else can for access to their cars. Even further, Uber is tangibly delivering a 30% utilization gain for its AVs in Atlanta and Austin vs. other operators and double the utilization rates vs. a typical LA operator. As soon as one operator decides to take advantage of that (many already have)... the rest will be at a structural disadvantage until they follow suit.

From their slide deck

A Detailed Update on the AV Landscape – Misconception #4:

Dara also spoke about the erroneous idea that almost all Uber profit comes from their top 20 cities. That would actually be fine if it were true (those cities are performing very well), but it isn’t. The top 20 cities in the USA are 25% of total Uber profit in this market. There is a very long tail of smaller cities, suburbs and even urban areas that are a large and growing overall % of the business. That supports the idea that regulations will be a web of inconsistency that competitors have to slowly navigate, leaning on partners like Uber to support them.

“Like Marriott doesn't have to own its hotels… you will see the same thing in the future on fleets.” – CEO Dara Khosrowshahi

Bonus Uber AV Misconception:

There’s one more misconception I wanted to discuss that Dara didn’t mention today. Some think Waymo and Tesla are the only games in town and will own this entire market. Not so fast, my friends. Uber will launch with several partners around the globe to expand from 7 to roughly 15 cities in 2026. Whether it’s Wayve in London, Avride in Dallas, Momenta in Germany, WeRide in the UAE, May Mobility in Arlington or others… Other players are here today and quickly approaching commercialization. You may rightfully be wondering how these companies can compete with Google, Tesla and Amazon (Zoox also coming) with their access to data and budgets. Legacy carmakers have the cash and the muscle, but not the brains to pull this off. Software disruptors like Waabi (newest partner) and Nuro have fantastic driverless technology and tools, but are starved for funding, compute and data. Nvidia has that compute and data, but doesn’t want to get into the business of building cars or operating a rideshare network.

Uber is the nexus of all of these ecosystem pieces and it’s bringing them together to unlock a lot more competition. Whether it’s the Uber/Nuro/Lucid arrangement, the Volkswagen/Uber/Mobileye project, the Mercedes/Momenta/Uber/Nvidia initiative or many more to come, Uber is matching strengths and eliminating bottlenecks for more vendors. Nvidia is really the most valuable partner here, as their driverless platform, synthetic data generation and massive amounts of world-leading compute are like food, oxygen and water on Mars for these companies. They are greatly helping companies accelerate innovation, while Uber is providing funding. It’s waiting for these cars to be ready so it can plug them into its app and greatly lowe the financial risk tied to disruptors and legacy automakers teaming up to build AVs. It’s also providing fleet maintenance, charging infrastructure, physical data, data tagging services and insurance (and revenue again, revenue guarantees) to these partners.

So yes… Tesla and Waymo are better positioned to beat all of these companies in isolation. I’d argue that this overarching, integrated ecosystem is far more capable of winning share. Uber frequently talks about a “go-to-market puzzle” for AVs, and they harmoniously provide (with Nvidia) the pieces needed for others to win in the future.

“We enter 2026 with a rapidly growing topline, significant cash flow, and a clear path to becoming the largest facilitator of AV trips in the world.” – Uber CEO Dara Khosrowshahi

More on AVs:

“We're very confident in terms of what we will do in a competitive market, and we're very confident that we're gonna be the first choice for AV manufacturers and technology companies to put their assets on our platform.” – Uber CEO Dara Khosrowshahi

Still Early?

Uber’s massive book of business still has plenty of room left for growth. Mature businesses generate slower rates of expansion mainly through price hikes and cross-selling more products to existing users. They do not tend to boast brisk new customer growth. Crossing 200M MAPCs while growing 18% Y/Y is nothing short of impressive at this scale. That is driving most of their growth, with cross-selling and frequency growth as secondary sources. Specifically, new rider growth for the mobility segment reached multi-year highs this quarter. Furthermore, their new low-cost options (longer wait times, bulk discounts etc.) are fostering a lot of the volume strength we see above. It’s not gouging customers to extend the runway or destroying the service value in the process.

And while new customer growth should remain strong through 2026, cross-selling momentum likely will too. 40% of Uber’s customers now use multiple products vs. 35% two quarters ago. Uber One is a big part of that success. While global expansion is helping the impressive number, 55% Y/Y growth with 46M members is still great. These are the customers they can deliver the most value to and the customers with the highest retention and lifetime value and average bookings. 35%+ of mobility bookings are now tied to UberOne, while that number is nearly 50% for mobility and delivery combined. They’ll keep adding more perks and marketing based on strong returns and rosy future expectations.

More on Delivery:

This segment is rocking. Restaurant delivery growth accelerated across the USA and abroad. It took more market share in the UK and France (where it already leads) and gained ground on leaders in Germany and Spain. All in all, they think they took more market share in almost every country they serve. 

In Grocery & Retail (G&R) growth also continued to accelerate. Black Friday retail bookings in the U.S. rose 300% Y/Y, as selection greatly improved with 45% Y/Y active storefront growth. The merchants keep understandably flocking to them.

Reporting Change:

A new UK tax law will mean they classify driver payments as contra-revenue instead of cost of revenue. That will be a 350 bps headwind to revenue as a percentage of bookings. I’m sure this will create noise in their 2026 reports, but it will not impact bookings or profit metrics at all. Those are the numbers to focus on for this year. If we’re assessing revenue growth, we should be excluding this from the 2026 revenue margin assumption for clearer comps.

A Few AI Notes:

Another solid quarter. While this company doesn’t typically deliver explosive upside surprise, it does deliver fantastically smooth and durable profitable compounding. And it does so at a massive scale. Those are the important things to me. I remain exceedingly pleased with the core business trends and their ability to successfully lengthen the runway seemingly every quarter. Their subscription is world-class, their network effect is world-class, their merchant value proposition is world-class and their team is world-class. Uber is world-class. In terms of the future, I am as optimistic as any rational person can be about their positioning within the AV revolution. 

As I wrote this piece, I thought to myself, “Why is this not a larger part of your holdings?” AV uncertainty is the only reason. I have to balance my confidence with the reality that I’m trying to foresee how a brand new technology and industry will take form. That’s hard and there are other capable companies trying to win too. Uber has the best shot in my mind, which is why it’s in my portfolio despite this important lack of clarity. But this is also why it’s not one of the largest holdings (for now) despite the awesome results and the cheap multiple. I like it where it is in the portfolio. I might make it a bit bigger in the near future, but not much.