Alphabet's Stock Plummets Amid AI Spending Surge and Revenue Shortfall

Alphabet Stock Sinks 8% as AI Spending Surges and Revenue Falls Short

Investor Concerns Mount as Alphabet's AI Investments Weigh on Market Value Alphabet Inc., the parent company of Google, faced a sharp market setback as its stock plunged 8% on February 5, wiping out $211 billion in market value. The decline, Alphabet's steepest since October 2023, was triggered by a revenue shortfall despite surpassing earnings estimates. Investor concerns deepened as the company revealed a significant increase in AI-related spending, with plans to allocate $75 billion in capital expenditure by 2025. The slowdown in cloud revenue growth further fueled uncertainty, raising questions about the sustainability of Alphabet's aggressive AI investment strategy in an increasingly competitive market. This comes against the backdrop of Alphabet revealing that it was to increase its spending on artificial intelligence technologies. The company also unveiled its ambitious spending targets, including $75 billion laid down for capital expenditure by 2025 compared to the $52.5 billion expended in the preceding year. This attempts to improve the search giant's AI muscle and support structure even as revenues moderate. This was coupled with uncertainty from Alphabet's cloud computing segment whose revenues rose by 30%. Although an increase, this was below the 35% recorded in the previous quarter and below market expectations. This deceleration is worrisome since Alphabet considers the cloud division as one of its strategic growth centres. Catalyzing further concern, the Chinese start-up has recently boasted it will create a competitive AI model for less than $6m and pointed out that it was not going to use Nvidia's superior gear at all. This has raised concern about the potential overinvestment by large U.S. technology companies that are competing with counterparts in other nations. However, Alphabet is not alone in seeking to take a leading role in the development of AI. Other primary such as Meta and Microsoft are also actively building cloud AI infrastructure to contend with every other firm as well as Chinese businesses. The focus on just creating new and better models of AI is important, growing worries from executives and analysts have highlighted the fact that control of data centers as well as access to good chips is paramount. This trend raises a major shift in how tech companies strategize, in which sizeable investments in AI blacks are considered essential for future success. Nevertheless, it remains generally believed that such investments are vital to the continued development of technology and sustaining competitive advantage in the ever-changing new world.

Alphabet's stock plunges on revenue miss and high AI spending - SiliconANGLE

Alphabet's stock plunges on revenue miss and high AI spending Investors bailed on Google LLC's parent company Alphabet Inc. in late trading today after it posted fourth-quarter revenue that fell short of Wall Street's expectations. The company only just came in ahead of expectations on earnings too. It reported earnings before certain costs such as stock compensation of $2.15 per share, edging past the Street's target of $2.13. It did well in terms of its bottom line, posting net income of $26.54 billion, up 28% from a year earlier. But it was the revenue miss that really caused a stir, as Alphabet generated $96.47 billion in sales, up 12% from a year earlier but below the $96.56 billion analyst estimate. It's notable that the company's rate of revenue growth declined on an annual basis, having risen 13% in the same quarter one year ago. Alphabet Chief Executive Sundar Pichai (pictured) insisted that the company delivered a "strong quarter" and said this was driven by its leadership in artificial intelligence and momentum across all of its key business segments. "We are building, testing, and launching products and models faster than ever, and making significant progress in compute and driving efficiencies," he said. "Our AI-powered Google Cloud portfolio is seeing stronger customer demand, and YouTube continues to be the leader in streaming watchtime and podcasts. Together, Cloud and YouTube exited 2024 at an annual revenue run rate of $110 billion." In a conference call with analysts, Pichai caused a bit of a stir when he said that the company plans to increase its capital expenditure to $75 billion in fiscal 2025 as part of an effort to build out its AI infrastructure. That's much more than the $58.84 billion that analysts were expecting the company to spend in the coming year. For the first quarter, the company aims to spend between $16 billion and $18 billion on CAPEX, which is greater than the $14.3 billion anticipated. "We are confident about the opportunities ahead, and to accelerate our progress, we expect to invest approximately $75 billion in capital expenditures in 2025," Pichai added. Alphabet's stock fell more than 7% in late-trading as investors digested what those numbers mean, and the drop suggests not everyone is convinced about the need to spend multiple billions of dollars on AI infrastructure. While Alphabet and its rivals like Meta Platforms Inc. and Microsoft Corp. are convinced of the need to invest billions to build out their data centers for the next generation of AI, the rise of Chinese startup DeepSeek Ltd. and other low-cost open-source AI models suggests that such heavy investments may not be necessary. Last month, the markets were rocked when it became apparent that DeepSeek's latest large language model could match the performance of advanced models such as OpenAI's GPT-4o and Google's Gemini, despite only being built at a fraction of the cost. However, U.S. technology giants are insistent that such spending is necessary. Last week, Meta CEO Mark Zuckerberg brushed aside any concerns, saying he plans to invest between $60 billion and $65 billion on AI over the next year. Microsoft has committed to spending as much as $80 billion. Alphabet's finance chief Anat Ashkenazi told analysts on the call that the bulk of its $75 billion figure will go on "technical infrastructure," including servers and data centers. That's necessary to "support the growth of our business across Google Services, Google Cloud and Google DeepMind," he added. Investing.com analyst Jesse Cohen said the biggest problem for Alphabet is that its investors want assurances regarding how long it will take the company to monetize those multi-billion dollar investments, but it hasn't been very forthcoming. "The street is demanding clearer timelines on when AI spending translates to earnings and sales growth, not just promises," he said. "The reaction underscores concerns that rivals like Microsoft, with its OpenAI partnership, are better positioned to convert AI hype into revenue." Google Cloud has been growing fast as the company strives to keep up with market leaders Amazon Web Services Inc. and Microsoft Azure, but investors were hoping to see it grow faster. Unfortunately, the cloud business unit had a disappointing quarter, with revenue rising 30% to $11.96 billion, below the $12.19 billion analyst estimate. One analyst asked Ashkenazi if the cloud revenue miss was due to a lack of compute capacity, and he admitted that's likely to be the case, saying the company saw strong demand for its AI products in the quarter, exiting the year with "more demand than we had available capacity". However, he reassured analysts that the company is "working very hard to bring more capacity online". Cohen added that investors are also concerned about Google Cloud's slower pace of growth, and want to know when its investments in AI are going to help boost that business. "For Alphabet to reassure investors, it needs to demonstrate that its AI bets, from Gemini models to Workspace integrations, can reignite Cloud momentum," he said. The Google Search business delivered total sales of $54.03 billion, up from $48.02 billion one year earlier. Within that segment, traffic acquisition costs came to $14.89 billion, below the $15.01 billion expected. "In Search, advances like AI Overviews and Circle to Search are increasing user engagement," Pichai told analysts. The company reported total advertising revenue of $72.46 billion, rising from $65.52 billion in the year-ago period. Within that segment, YouTube ad revenue came to $10.47 billion. Elsewhere, the Other Bets segment, which includes the self-driving car business Waymo and the life sciences unit Verily, delivered revenue of $400 million in the quarter, down 39% and some way off the Street's $614.6 million target. During the quarter, Waymo made a number of promising announcements, saying that its robotaxi service now operates in Los Angeles, Phoenix and San Francisco, where it covers more than 500 square miles of public roads. In December, it revealed plans to expand on this by launching new commercial services in Austin, Texas, Miami and Atlanta in the coming year. It will also start testing the robotaxi service in Tokyo, the first time it has expanded its self-driving cars globally.

Alphabet's stock plunges on revenue miss and AI spending largesse - SiliconANGLE

Alphabet's stock plunges on revenue miss and AI spending largesse Investors bailed on Google LLC's parent company Alphabet Inc. in late-trading today after it posted disappointing fourth-quarter revenue that fell short of Wall Street's expectations. The company only just came in ahead of expectations on earnings too. It reported earnings before certain costs such as stock compensation of $2.15 per share, edging past the Street's target of $2.13. But it was the revenue miss that really caused a stir, with Alphabet generating just $96.47 billion in sales, up 12% from a year earlier but below the $96.56 billion analyst estimate. It's notable that the company's rate of revenue growth declined on an annual basis, having risen 13% in the same quarter one year ago. Alphabet did well in terms of its bottom line, posting net income of $26.54 billion, up 28% from a year earlier. Alphabet Chief Executive Sundar Pichai (pictured) insisted that the company delivered a "strong quarter" and said this was driven by its leadership in artificial intelligence and momentum across all of its key business segments. "We are building, testing, and launching products and models faster than ever, and making significant progress in compute and driving efficiencies," he said. "Our AI-powered Google Cloud portfolio is seeing stronger customer demand, and YouTube continues to be the leader in streaming watchtime and podcasts. Together, Cloud and YouTube exited 2024 at an annual revenue run rate of $110 billion." In a conference call with analysts, Pichai caused a bit of a stir when he said that the company plans to increase its capital expenditure to $75 billion in fiscal 2025 as part of an effort to build out its AI infrastructure. That's much more than the $58.84 billion that analysts were expecting the company to spend in the coming year. For the first quarter, the company aims to spend between $16 billion and $18 billion on CAPEX, which is greater than the $14.3 billion anticipated. "We are confident about the opportunities ahead, and to accelerate our progress, we expect to invest approximately $75 billion in capital expenditures in 2025," Pichai added. Alphabet's stock fell more than 7% in late-trading as investors digested what those numbers mean, and the drop suggests not everyone is convinced about the need to spend multiple billions of dollars on AI infrastructure. While Alphabet and its rivals like Meta Platforms Inc. and Microsoft Corp. are convinced of the need to invest billions to build out their data centers for the next generation of AI, the rise of Chinese startup DeepSeek Ltd. and other low-cost open-source AI models suggests that such heavy investments may not be necessary. Last month, the markets were rocked when it became apparent that DeepSeek's latest large language model could match the performance of advanced models such as OpenAI's GPT-4o and Google's Gemini, despite only being built at a fraction of the cost. However, U.S. technology giants are insistent that such spending is necessary. Last week, Meta CEO Mark Zuckerberg brushed aside any concerns, saying he plans to invest between $60 billion and $65 billion on AI over the next year. Microsoft has committed to spending as much as $80 billion. Alphabet's finance chief Anat Ashkenazi told analysts on the call that the bulk of its $75 billion figure will go on "technical infrastructure", including servers and data centers. That's necessary to "support the growth of our business across Google Services, Google Cloud and Google DeepMind," he added. Investing.com analyst Jesse Cohen said the biggest problem for Alphabet is that its investors want assurances regarding how long it will take the company to monetize those multi-billion dollar investments, but it hasn't been very forthcoming. "The street is demanding clearer timelines on when AI spending translates to earnings and sales growth, not just promises," he said. "The reaction underscores concerns that rivals like Microsoft, with its OpenAI partnership, are better positioned to convert AI hype into revenue." Google Cloud has been growing fast as the company strives to keep up with market leaders Amazon Web Services Inc. and Microsoft Azure, but investors were hoping to see it grow faster. Unfortunately, the cloud business unit had a disappointing quarter, with revenue rising 30% to $11.96 billion, below the $12.19 billion analyst estimate. One analyst asked Ashkenazi if the cloud revenue miss was due to a lack of compute capacity, and he admitted that's likely to be the case, saying the company saw strong demand for its AI products in the quarter, exiting the year with "more demand than we had available capacity". However, he reassured analysts that the company is "working very hard to bring more capacity online". Cohen added that investors are also concerned about Google Cloud's slower pace of growth, and want to know when its investments in AI are going to help boost that business. "For Alphabet to reassure investors, it needs to demonstrate that its AI bets, from Gemini models to Workspace integrations, can reignite Cloud momentum," he said. The Google Search business delivered total sales of $54.03 billion, up from $48.02 billion one year earlier. Within that segment, traffic acquisition costs came to $14.89 billion, below the $15.01 billion expected. "In Search, advances like AI Overviews and Circle to Search are increasing user engagement," Pichai told analysts. The company reported total advertising revenue of $72.46 billion, rising from $65.52 billion in the year-ago period. Within that segment, YouTube ad revenue came to $10.47 billion. Elsewhere, the Other Bets segment, which includes the self-driving car business Waymo and the life sciences unit Verily, delivered revenue of $400 million in the quarter, down 39% and some way off the Street's $614.6 million target. During the quarter, Waymo made a number of promising announcements, saying that its robotaxi service now operates in Los Angeles, Phoenix and San Francisco, where it covers more than 500 square miles of public roads. In December, it revealed plans to expand on this by launching new commercial services in Austin, Texas, Miami and Atlanta in the coming year. It will also start testing the robotaxi service in Tokyo, the first time it has expanded its self-driving cars globally.

Google's Finances Are in Chaos as the Company Flails at Unpopular AI

Google's parent company Alphabet failed to hit sales targets, falling a 0.1 percent short of Wall Street's revenue expectations -- a fraction of a point that's seen the company's stock slide almost eight percent today, in its worst performance since October 2023. It's also a sign of the times: as the New York Times reports, the whiff was due to slower-than-expected growth of its cloud-computing division, which delivers its AI tools to other businesses. While a reported $96.5 billion in revenue versus the expected $96.6 billion sounds well within a margin of error, it shows that even for a company of Google's scale and stature, actually making money off AI -- even on the infrastructure side -- is still a risky business. That's despite Alphabet committing a whopping $75 billion on capital expenditures as it builds out AI infrastructure, $22 billion more than just last year, following the lead of its competitors in the AI space, including Meta. Everyone's pouring money in, but it's as unclear as ever when the industry will start generating meaningful revenue -- and for how many players. Investors are also still reeling from the emergence of Chinese AI startup DeepSeek, which shook Silicon Valley to its core last week. The company's ultra-lean and highly efficient AI models -- that can be trained for a tiny fraction of the price of Western competitors but still keep up -- caught the AI industry by surprise, wiping out over $1 trillion in market value in a single day. Is Alphabet's latest earnings result the canary in the coal mine? Should the AI industry brace for tougher days ahead as investors become increasingly skeptical of what the tech has to offer? Or are investors concerned over OpenAI's ChatGPT overtaking Google's search engine? Illustrating the drama, this week Google appears to have retroactively edited the YouTube video of a Super Bowl ad for its core AI model called Gemini, to remove an extremely obvious error the AI made about the popularity of gouda cheese. "Although it's still well insulated, Google's advantages in search hinge on its ubiquity and entrenched consumer behavior," Emarketer senior analyst Evelyn Mitchell-Wolf told The Guardian. This year "could be the year those advantages meaningfully erode as antitrust enforcement and open-source AI models change the game," she added. "And Cloud's disappointing results suggest that AI-powered momentum might be beginning to wane just as Google's closed model strategy is called into question by DeepSeek."

Google slammed with $200B stock hit over AI spending fears, slowing...

Google parent Alphabet's stock plunged by more than 8% -- wiping out more than $200 billlion in market value -- after the search giant unveiled plans for a massive uptick in AI-related spending despite a slowdown in revenue. Google and other US tech firms are facing intense investor scrutiny over their ballooning AI spending plans after Chinese startup DeepSeek revealed last month it had trained a model for less than $6 million - purportedly without access to chip supplier Nvidia's best hardware. Alphabet shares in midday trades were recently off 7.6% at $190.70. If the stock selloff holds, it would erase all of Alphabet's stock gains since the start of the year. CEO Sundar Pichai said Google would spend a whopping $75 billion on capital expenditures in 2025 alone - up from $52.5 billion last year and much higher than the number expected by analysts. "If this is the new trend for Alphabet, then investors should be worried," said D.A. Davidson analyst Gil Luria. Pichai said that DeepSeek had done "very, very good work" but asserted that Google's AI products were "some of the most efficient models out there." He also defended Google's spending plans. "The cost of actually using [artificial intelligence] is going to keep coming down, which will make more use cases feasible," Pichai added. "And that's the opportunity space." Revenue from Alphabet's cloud-computing division rose 30% -- less than the 35% jump from the company's previous quarter and worse than Wall Street expected. Overall, the Google parent reported quarterly revenue rose 12% to $96.5 billion - its lowest growth rate since 2023. "While the Cloud segment delivered revenue growth of 30%+ for a second consecutive quarter, results were slightly below investor expectations," Wedbush analyst Dan Ives said in a note to clients. "That said, management commentary was positive and indicated that demand outpaced available capacity in the quarter." "The more aggressive pace of investment should alleviate capacity constraints as AI demand continues to scale," Ives added. Google is one of several Big Tech giants that have teed up major investments in AI infrastructure as they race against China - and each other - to develop advanced models. Investors feared that DeepSeek's ultra-efficient model signaled that US tech giants had wildly overspent on chips and other AI infrastructure. However, Meta and Microsoft each doubled down on their spending plans in earnings calls last week - with executives and analysts alike asserting that access to data centers and advanced chips would be a crucial advantage over time.

Alphabet's Stock Drops After Google Cloud Miss; Investors Wary of $75B Data Center Spending

Analysts warn Alphabet faces tougher competition from AI-powered search tools like ChatGPT and Microsoft Copilot. Alphabet's fourth-quarter revenue fell short of expectations, sending shares down 9% on Wall Street. Investors are wary of the company's $75 billion AI-driven capital spending, well above the $57.9 billion expected. Analysts warn that AI rivals like ChatGPT and Microsoft Copilot threaten Google's dominance amid rising regulatory and competitive pressures. Disappointing Results Hit Alphabet Stock Alphabet reported fourth-quarter revenue of $81.6 billion, falling short of analysts' $82.8 billion estimate, causing shares to drop over 9% after hours. Net income was $2.15 per share, slightly above Wall Street's $2.13 estimate. Search advertising brought in $54 billion, slightly beating expectations. YouTube recorded $10.5 billion in revenue, surpassing the $10.2 billion forecast, driven by increased ad spending on podcasts during the U.S. election. Meanwhile, Alphabet's Other Bets unit, including Waymo and Verily, generated $400 million, missing the $592 million estimate. Waymo now averages 150,000 weekly trips and plans to expand internationally with a test in Tokyo. CEO Sundar Pichai noted ongoing work on a new version of its self-driving technology to reduce hardware costs. Huge Data Center Investment However, investor concerns remain over Alphabet's heavy AI infrastructure spending, which helped boost Broadcom shares by 6% in after-hours trading. Alphabet revealed plans for $75 billion in capital expenditures for 2025, significantly surpassing analysts' $57.9 billion estimate. On the earnings call, Pichai emphasized that this investment is "directly driving revenue" by supporting customers. "The cost of actually using AI is going to keep coming down. This will make more extraordinary use cases feasible," Pichai said , responding to accusations of spending profligately. "That's the opportunity space. It's as big as it comes and that's why you're seeing us invest to meet that moment," he added. AI Evolution Puts Google at Risk "A raft of negative factors suggest that life is getting much harder for Alphabet. It is caught up in a whirlwind of competitive pressures, regulatory clampdowns and political interference," Dan Coatsworth, investment analyst at AJ Bell, told CCN. "Alphabet is being punished for missing quarterly revenue expectations for the first time since February 2023 and for heavily spending on AI-related projects," Coatsworth said. "Investors expect flawless execution from the tech giant, yet weaker-than-expected growth in cloud computing implies the AI craze isn't automatically turning into big bucks for infrastructure providers," he added. According to Coatsworth, the $75 billion guidance for capital expenditure was equally worrying. "Previously, large capex would have been taken as a positive sign that Alphabet was doing everything it could to capitalize on the hot AI trend. Now the reverse is true." Alphabet may be digging itself a big hole and potentially wasting money if rivals like DeepSeek have shown that it is possible to do things much cheaper. "Alphabet's Google operations have been king of the search world for several decades. The evolution of AI now threatens to knock Google off the top of the mountain," Coatsworth noted. "ChatGPT and Microsoft Copilot use AI-powered search to great effect, and the more these services become embedded into everyday lives - either through their personal devices or at work - the bigger the threat to Google is," he concluded.

Google Parent Alphabet's Stock Tumbles Amid Worries Whether AI Spending Will Pay Off

Some analysts suggested the investment could help drive growth as Alphabet raises its capacity to meet demand. Shares of Google parent Alphabet (GOOGL) tumbled Wednesday as several analysts lowered their price targets for the stock, citing concerns about the tech giant's weaker-than-expected cloud growth and plans to ramp up spending on AI. Alphabet said it plans to invest as much as $75 billion in capital expenditures this year, much of which is expected to go toward expanding its artificial intelligence infrastructure to meet demand. That figure is about $15 billion more than Wall Street expected, UBS analysts said, which suggests new Google products will need to emerge in order to "warrant the higher level of investment." The bank dropped its price target to $191 from $211, saying "investors will need to wait" for Alphabet's AI investments to pay off. JPMorgan analysts took their price target down to $220 from $232, expressing similar concerns. By contrast, Meta (META), which said it plans to invest $60 billion to $65 billion this year, offered a "more apparent" path to a return on that investment through its advertising business, the analysts said. The lower price targets also come after Chinese AI startup DeepSeek claimed to develop an AI model rivaling American ones for a fraction of the cost, raising concerns about American firms' AI spending. However, several analysts including JPMorgan and Wedbush also suggested the investment could help boost growth as Alphabet raises its cloud capacity to meet demand. Analysts at Bank of America added Wall Street may be "underestimating Al Overview benefits for [Google] Search monetization in 2025." The bank maintained a "buy" rating and $225 price target. Shares of Alphabet dropped nearly 8% in intraday trading Wednesday to $192.23. Despite Wednesday's losses, they've gained more than 30% over the past 12 months.

Alphabet shares tumble after revenue miss, cloud sales disappoint

STORY: Google parent Alphabet shares slid in after-hours trade Tuesday after its cloud unit posted weak sales and despite the company announcing a plan to spend big on AI. The tech giant said it would spend $75 billion on its AI buildout this year- 29% more than Wall Street expected. However investors began signaling impatience over profitability. Shares of the Google parent fell 9% in extended trading. That roughly offsets the company's gains on the year so far. One analyst told Reuters that up until now, Google Cloud had grown fast enough to tamp down worry over ramped up spending. Alphabet CEO Sundar Pichai defended the dramatic increase on a conference call with analysts. Some are raising questions about AI capital spend by Google and U.S. rivals after the emergence of China's seemingly low-cost DeepSeek. Pichai said Google's Gemini family of AI models is comparable in efficiency to DeepSeek and that, quote, "The cost of actually using (AI) is going to keep coming down." Alphabet has been spending heavily on an infrastructure development to support AI research and integration into products such as search and cloud services. The company's CFO said the majority of capex for 2025 would go into building servers and data centers. Alphabet plans to spend as much as $18 billion in the first quarter. That's a far bigger number than the roughly $6 million Chinese rival DeepSeek says it spent on the final training run to develop its AI model. Developers at leading U.S. AI firms say DeepSeek's total training spend was likely much higher. However the news about what it says it spent shocked tech stocks in January, contributing to Nvidia's record one-day drop of $593 billion in market value.

Google's A.I. Spending Spree Spooks Wall Street

Google parent company Alphabet is spending money more quickly than making it. Alphabet (GOOGL), the parent company of Google (GOOGL), is looking to spend a staggering $75 billion in 2025 to "accelerate" its A.I. progress, the company said in its fourth-quarter earnings report yesterday (Feb. 4). The figure represents an over 40 percent jump from last year's A.I. spending and came as a shock to Wall Street, sending Alphabet shares to fall more than 8 percent today. Sign Up For Our Daily Newsletter Sign Up Thank you for signing up! By clicking submit, you agree to our <a href="http://observermedia.com/terms">terms of service</a> and acknowledge we may use your information to send you emails, product samples, and promotions on this website and other properties. You can opt out anytime. See all of our newsletters "This is a significant increase, and it shows that Alphabet is throwing the kitchen sink at its A.I. plans," said Kathleen Brooks, research director at XTB, in an analyst note. What worries investors more is that Alphabet is spending money more quickly than making it. Alphabet's Google Cloud revenue, which Brooks described as "the clearest way to see if Google is monetizing A.I.," came in at $12 billion for the October-December quarter, up 30 percent from the same period in 2023 but lower than what analysts had expected. Alphabet's total quarterly revenue was $96.5 billion, up 12 percent from the year prior. Revenue from Google Services, including its core online search business, rose 10 percent to $84 billion, while revenue from Alphabet's Other Bets division dropped 39 percent to $400 million. When asked whether revenue could have been higher with more resources, Anat Ashkenazi, Alphabet's chief financial officer, told analysts yesterday that the company "exited the year with more demand than we had available capacity." This contributed to the decision to hike up capital expenditures, added Ashkenazi, with investments earmarked for servers, data centers and networking. CEO Sundar Pichai assured investors that A.I. costs will eventually come down, making the initial investment justifiable. "Part of the reason we are so excited about the A.I. opportunity is we know we can drive extraordinary use cases because the cost of actually using it is going to keep coming down," he said. "It's as big as it comes, and that's why you're seeing us invest to meet that moment." Alphabet isn't the only major tech company sprinting to flesh out its A.I. infrastructure. Microsoft (MSFT) plans to spend $80 billion on A.I. data centers throughout 2025, a notable hike from the $50 billion it spent in fiscal 2024. Meta (META)'s capital expenditures this year are expected to reach as high as $65 billion, compared to $39 billion last year. However, Alphabet is the only one suffering a stock selloff after announcing such plans. "Why does Google get hit on another year of heavy infrastructure investment while Meta's 60%+ CapEx increase in 2025 is embraced by the Street?" asked Doug Anmuth, an analyst with JPMorgan, in a client note. Alphabet is facing increasing pressure to deliver on its A.I. promises. In an analyst note, Josh Beck of Raymond James urged Alphabet to "spell out monetization potential" for its A.I.-generated search summaries, known as AI Overviews, and Gemini model use cases. On yesterday's earnings call, Pichai teased that the company has "very good ideas for native ad concepts." He also reiterated Google's plan to offer free and paid subscriptions for Gemini products. Big Tech's large capital expenditures have also come under heat in light of DeepSeek, a Chinese A.I. firm that claims to be able to build powerful A.I. models using far fewer resources. Pichai praised DeepSeek's "tremendous team" as having done "very, very good work" but added that Gemini's reasoning models are on par with DeepSeek's in terms of efficiency.

Alphabet shares fall 8% as cloud growth concerns and AI spending rattle investors

Alphabet shares fell 8% on Wednesday as investors balked at the Google parent's slowing cloud growth and planned $75 billion capital spending for the year, underscoring growing fears over Big Tech's escalating artificial intelligence costs. The company was on course to lose roughly $180 billion in market value and erase all its stock price gains for the year if the losses hold. The dour report also pulled down shares of cloud rival Amazon.com, which reports earnings on Thursday. Alphabet reported a 30% rise in quarterly revenue from its cloud business that was slower than the 35% jump seen in the prior quarter and also fell short of market expectations, mirroring the weakness seen at larger cloud rival Microsoft . Analysts said the results signified a "big shift" in Google's business - from being a capital-light, high-margin search advertising business to a capital-intensive, more competitive AI company. Its projected 2025 outlay also came in 29% above estimates. The company said it will prioritize expensive AI investments over the risk of falling behind competitors, which has unsettled investors looking for a clearer route to AI-driven profits. "Google seems to be falling into the same trap Microsoft has fallen into the last few quarters ... If this is the new trend for Alphabet, then investors should be worried," said D.A. Davidson analyst Gil Luria. The massive capex ramp comes at a time when China's DeepSeek low-cost AI model has led to more pointed questions about Big Tech's multibillion-dollar AI development spending. Last week, Microsoft and Meta Platforms executives defended their hefty AI spending plans, saying it was crucial to staying ahead in the new field. "This (CapEx) is a significant increase, and it shows that Alphabet is throwing the kitchen sink at its AI plans," said Kathleen Brooks, research director at trading platform XTB. The spending concerns also overshadowed better-than-expected revenues at Google's mainstay ads business, which showed signs of strength despite an uptick in competition from social media companies including Meta. "This is Google being perfect on their most critical key performance indicator and we've still got a stock down 7-8% ... Investors have decided that Google needs to gain cloud share to be viewed as an AI winner," Bernstein analyst Mark Shmulik wrote. At least ten brokerages cut their price target on Alphabet's stock, while two analysts lifted the targets, bringing the median target to $217, according to LSEG data. That compares with the stock's price of $192.7 in early trading. Alphabet's shares are the cheapest of the major three U.S. cloud providers, with a 12-month forward price-to-earnings ratio of 22.7. Amazon's is nearly 39 and Microsoft's is 29.

Google shares slide on spending plans despite sales jump

Google's parent company Alphabet on Tuesday reported revenue jumped in the recently-ended quarter, but shares sank on concerns it may be pouring too much money into artificial intelligence. Google and rivals are spending billions of dollars on data centers and more for AI, while meaningful returns on investments remain elusive and the rise of lower-cost model DeepSeek from China raises questions about how much needs to be spent. "We are pushing the next frontiers from AI agents, reasoning and deep research to state-of-the-art video, quantum computing and more," Alphabet chief executive Sundar Pichai said during an earnings call. "The company is in a great rhythm and cadence, building, testing, and launching products faster than ever before." Pichai said this is translating into increased use of its products, including AI search summaries that are now available in more than 100 countries. Alphabet said revenues jumped 12 percent to $96.5 billion in the quarter, but the company's share price sank more than 7 percent in after-hours trading as investors were disappointed by lower-than-expected revenue growth and the company's ambitious capital spending forecast for 2025. Google Cloud revenue, while growing 30 percent to $12 billion, fell short of expectations, raising questions about the division's ability to compete with rivals in the heated AI infrastructure market. "Q4 was a strong quarter driven by our leadership in AI and momentum across the business," Pichai said. "We'll continue to invest in our cloud business to ensure we can address the increase in customer demand." Pichai added that Google is working on "even better thinking models" that it will share with developers soon. Alphabet announced plans to invest approximately $75 billion in capital expenditures in 2025, a figure that surprised analysts and highlighted the mounting costs of AI development. 'Chaotic backdrop' Like other tech giants, Alphabet is betting heavily on artificial intelligence across all of its products. "Part of the reason we are so excited about the AI opportunity is we know we can drive extraordinary use cases because the cost of actually using it is going to keep coming down," Pichai said. "The opportunity space is as big as it comes, and that's why you're seeing us meeting that moment." In December, the company announced the launch of Gemini 2.0, its most advanced AI model to date. The company's core Google Services segment, which includes search and YouTube, posted revenues of $84.1 billion, up 10 percent year-over-year. Within this segment, YouTube advertising revenue grew to $10.5 billion, while Google Search revenue reached $54 billion. Pichai told financial analysts that autonomous car division Waymo made "tremendous progress" last year and its robotaxi service is averaging 150,000 trips weekly. Waymo One robotaxi operations will expand to Austin and Atlanta this year, and to Miami next year, according to Pichai. "And in the coming weeks, Waymo One vehicles will arrive in Tokyo for their first international road trip," Pichai said. The company's workforce remained largely stable at 183,323 employees, reflecting ongoing cost control measures. Hanging over Google in 2025 are two major antitrust cases in the United States concerning the company's dominant position in search engines and ad technology. A US judge has already found Google operating an illegal monopoly in search, and the company faces potential forced restructuring, including the possible sale of Chrome, its world-leading web browser. Meanwhile, Britain's competition watchdog recently launched its own investigation into Google's search engine market dominance and its impact on consumers and businesses. The decision in the US ad tech case is expected in the coming weeks. "Between defending itself against antitrust lawsuits from multiple governments, courting US TikTok advertisers to capitalize on a yet-elusive ban, reconfiguring search around generative AI, and convincing the market to invest in Gemini, Google is fighting ongoing battles on several fronts," said Emarketer senior analyst Evelyn Mitchell-Wolf. "Against this chaotic backdrop, Google's core ads business has maintained healthy growth."

Google parent Alphabet's earnings disappoint Wall Street amid stiff AI competition

Revenue slowdown reflects 'challenging year' firm has had and 2025 may be year it loses competitive edge, say analysts Shares of Google's parent company Alphabet fell more than 6% after the company reported a slight miss in expected revenue on Tuesday. The company reported $96.5bn, compared with analyst expectations of $96.67 bn. The company surpassed investors' expectations of $2.13 in earnings per share, however, with $2.15 in EPS. "Q4 was a strong quarter driven by our leadership in AI and momentum across the business," Alphabet chief executive Sundar Pichai wrote in a statement. "We are building, testing, and launching products and models faster than ever, and making significant progress in compute and driving efficiencies." The company reported $84bn in its services revenue, which includes Google search and YouTube ads and $12bn in Cloud revenues, a 30% increase year over year. As competition heats up in various sectors of Alphabet's business, analysts will be looking for more details about a wide range of topics including the company's AI spending, its Cloud revenue, and its ability to continue to bolster its search advantage against new and existing generative AI players such as China's DeepSeek and OpenAI. The company's revenue slowdown reflects the "challenging year" Google has had and 2025 might be the year that it loses its competitive edge, according to Emarketer senior analyst Evelyn Mitchell-Wolf. "Although it's still well insulated, Google's advantages in search hinge on its ubiquity and entrenched consumer behavior," Mitchell-Wolf said in a statement. This year "could be the year those advantages meaningfully erode as antitrust enforcement and open source AI models change the game. And Cloud's disappointing results suggest that AI-powered momentum might be beginning to wane just as Google's closed model strategy is called into question by DeepSeek." Alphabet also said it plans to spend $75bn on capital expenditures in the next year, largely to build out its artificial intelligence capabilities and infrastructure. "Our results show the power of our differentiated full-stack approach to AI innovation and the continued strength of our core businesses," Pichai wrote. "We are confident about the opportunities ahead, and to accelerate our progress, we expect to invest approximately $75 billion in capital expenditures in 2025." Spending on building out AI infrastructure and development has continued to rise across the industry, and Alphabet is expected to be no exception. Meta said it planned to spend $65bn on AI infrastructure just in 2025. That's partly why news of Deepseek's AI model, which the company said they trained with just $5.6m, sparked investor panic in the US and erased $1tn from the stock market. But research firm SemiAnalysis now estimates that DeepSeek actually spent a total of almost $1.3bn. Analysts will be looking to hear how this has impacted the way Alphabet look at its own spending and monetizing its AI search features. "It will be interesting how the rising costs of AI impact Alphabet's roadmap for AI-integrated advertising, especially in light of DeepSeek's revelation that they may have wasted tremendous money and energy," said Nikhil Lai, senior analyst at Forrester. The company appears to also be opening the door to develop AI for more use cases, including for national security. Moments before the company reported its earnings, the company also removed its pledge not to use its AI technology for weapons, surveillance and technology that can "cause or are likely to cause overall harm". In a blog post, Google's head of AI, Demis Hassabis, and the company's senior vice-president for technology and society, James Manyika, wrote that as global competition for AI leadership increases, the company believes "democracies should lead in AI development" which are guided by "freedom, equality, and respect for human rights". "And we believe that companies, governments, and organizations sharing these values should work together to create AI that protects people, promotes global growth, and supports national security." Analysts will also likely have questions about the Department of Justice case against the search giant, in which the tech giant suffered landmark loss. A judge found the company maintained a monopoly in general search and text advertising services. The justice department has suggested breaking up the company as a means to remedy this. China has also set its sights on Google. After the Trump administration announced it was imposing tariffs on China, China responded by announcing a range of measures including a new inquiry into whether Google violated the country's anti-monopoly law.

Alphabet reported a revenue miss that sent the stock tumbling. What analysts are saying

Despite Alphabet's disappointing fourth-quarter results , many Wall Street analysts remain optimistic that the company's artificial intelligence investments will pay off. Alphabet's revenue of $96.47 billion in the prior quarter fell short of the $96.56 billion forecast by analysts, according to LSEG. Revenue growth slowed to around 12% year over year, compared to a 13% rise in the same quarter last year. The company also announced it plans to invest around $75 billion in AI this year , coming ahead of the $59.73 billion consensus estimate, per Visible Alpha. Shares of the Google parent company were last down nearly 7% during premarket trading. GOOGL 1D mountain Alphabet shares on Wednesday "Why does Google get hit on another year of heavy infrastructure investment while Meta's 60%+ capex increase in 2025 is embraced by the Street?" JPMorgan analyst Doug Anmuth asked in a client note on Wednesday. Pushback on the company's quarterly report is stemming around the "three C's: Capex, cloud revenue trajectory and costs," Anmuth added. While acknowledging that the stock may stay pressured in the near term due to the higher-than-expected spending outlook, the analyst remains bullish on Alphabet's AI innovations and advertising growth are encouraging. Anmuth reiterated his overweight rating on shares, though he trimmed his price target to $220 from $232. The new price target indicates 6.6% upside from Tuesday's close. Bank of America and Goldman Sachs are some of the other firms confident in Alphabet's status as a generative AI leader. Both firms reiterated their buy ratings on the stock following the company's earnings release. "We continue to advocate that the combination of AI distribution at scale (collection 1b+ user applications) and scale of compute to both invest and drive efficiencies remain as a dual under-appreciated narrative in terms of AI over the long-term, particularly as we move from the 'infrastructure' to 'platform' and 'application' layers of AI monetization," Goldman analyst Eric Sheridan said in a Wednesday note. BofA's Justin Post also wrote that that the "Street could be underestimating AI Overview benefits for Search monetization in 2025." Sheridan raised his price target to $220 from $215, while Post maintained his $225 forecast. Overhangs remain To be sure, some firms are staying on the sidelines on Alphabet. UBS maintained its neutral rating on the stock, highlighting lack of clarity as to whether Google will be able to greater monetize its AI Overviews. "For the time being we alongside investors will need to wait for sharper product development/release signals to materialize," analyst Stephen Ju said in a note on Wednesday. He lowered his price target to $209 from $211, implying upside of just 1.3% from Tuesday's close. Ju believes shares will stay pressured from the time being due to Google's regulatory overhangs, which could lead to potential market share loss. Bernstein's Mark Shmulik also kept his market perform rating and lowered his price target to $200 from $210. That signals downside of 3% going forward. "Google stock moves now seem a lot more tied to Google Cloud's fortunes -- this is the 3rd quarter where the stock reaction tightly correlates to Cloud's performance vs. expectations. The theory goes something like this: If Google wants to be viewed and treated like an AI winner, we need some quantified [key performance indicators]," he said. "Cloud growth is such a KPI, and while 30% Y/Y growth is nothing to sneeze at, it's a steeper deceleration Q/Q than investors were expecting and slows the share capture story against the Big 2 of AWS and Azure."

Alphabet faces scrutiny on AI spending as Google cloud growth slows

Alphabet's capital expenditure is estimated to have been $50 billion for last year, according to LSEG, with more planned for 2025 to support its cloud expansion and AI-driven search features, including summaries, which are vital to defending its market share and attracting more ad revenue.Alphabet will face investor scrutiny over its massive spending on AI when it reports earnings on Tuesday, as revenue growth at the Google parent likely slowed in the holiday quarter due to a slowdown in its advertising and cloud businesses. Like other U.S. technology heavyweights, Alphabet faces new scrutiny on its capital expenditure after Chinese startup DeepSeek last month launched low-cost AI models that threaten to push the AI industry into a price war. Alphabet's capital expenditure is estimated to have been $50 billion for last year, according to LSEG, with more planned for 2025 to support its cloud expansion and AI-driven search features, including summaries, which are vital to defending its market share and attracting more ad revenue. Microsoft and Meta Platforms executives defended their hefty AI spending plans last week, saying they were crucial to staying ahead in the new field. Meanwhile, Google Cloud growth is expected to decelerate in the fourth quarter amid high expectations for the segment. "Although (the cloud unit's) rate of growth is expected to slow, elevated investment is expected to continue, but efficiency gains have so far kept profits buoyant. Sustaining this balancing act will be a critical and investors will want to see evidence of this," said Susannah Streeter, head of money and markets, Hargreaves Lansdown. Revenue from Google's Search and Other business is expected to have risen 11.2% in the fourth quarter, according to Visible Alpha estimates, compared with a 12.2% rise in the third quarter. Overall, Alphabet's revenue is expected to grow 11.9% to $96.6 billion, slower than the third quarter, according to estimates compiled by LSEG. The company - whose Search and YouTube services are used by more than 2 billion people each month - is also trying to retain its dominant share in the search advertising market amid rising competition from e-commerce firm Amazon.com and social media apps such as TikTok. Higher political ad spending around the U.S. Presidential elections may have aided Google in the fourth quarter, after Facebook-owner Meta also reported a similar ad revenue boost. Still, Meta's subdued first-quarter forecast has sparked concerns over the ad market outlook as economic uncertainty increases with the looming threat of global tariffs. Cloud focus Expectations are high for Google's cloud business after the segment notched its fastest growth in two years in the September quarter thanks to rising AI spending by businesses. Alphabet's shares have risen about 7% this year, following a 35% rally last year, driven by increasing investor confidence in its AI bets. Still, worries of a bigger-than-expected slowdown have mounted since last week after lackluster numbers from Microsoft, whose Azure cloud computing growth slowed in the December quarter as it prioritized AI services over core cloud offerings. "We're going to want to see if Google has the same issues that Microsoft did where AI was a source of growth, but the core hyperscaler business did poorly. We're going to want to see that that's not the case for Google," said D.A. Davidson analyst Gil Luria. Google Cloud is expected to report a 32% rise in revenue in the fourth quarter, according to LSEG data, after clocking growth of 35% in the third quarter. That would be faster than much-bigger rival Microsoft's 31% jump and an estimated 19% increase for Amazon.

Alphabet Faces Scrutiny on AI Spending as Google Cloud Growth Slows

(Reuters) - Alphabet will face investor scrutiny over its massive spending on AI when it reports earnings on Tuesday, as revenue growth at the Google parent likely slowed in the holiday quarter due to a slowdown in its advertising and cloud businesses. Like other U.S. technology heavyweights, Alphabet faces new scrutiny on its capital expenditure after Chinese startup DeepSeek last month launched low-cost AI models that threaten to push the AI industry into a price war. Alphabet's capital expenditure is estimated to have been $50 billion for last year, according to LSEG, with more planned for 2025 to support its cloud expansion and AI-driven search features, including summaries, which are vital to defending its market share and attracting more ad revenue. Microsoft and Meta Platforms executives defended their hefty AI spending plans last week, saying they were crucial to staying ahead in the new field. Meanwhile, Google Cloud growth is expected to decelerate in the fourth quarter amid high expectations for the segment. "Although (the cloud unit's) rate of growth is expected to slow, elevated investment is expected to continue, but efficiency gains have so far kept profits buoyant. Sustaining this balancing act will be a critical and investors will want to see evidence of this," said Susannah Streeter, head of money and markets, Hargreaves Lansdown. Revenue from Google's Search and Other business is expected to have risen 11.2% in the fourth quarter, according to Visible Alpha estimates, compared with a 12.2% rise in the third quarter. Overall, Alphabet's revenue is expected to grow 11.9% to $96.6 billion, slower than the third quarter, according to estimates compiled by LSEG. The company - whose Search and YouTube services are used by more than 2 billion people each month - is also trying to retain its dominant share in the search advertising market amid rising competition from e-commerce firm Amazon.com and social media apps such as TikTok. Higher political ad spending around the U.S. Presidential elections may have aided Google in the fourth quarter, after Facebook-owner Meta also reported a similar ad revenue boost. Still, Meta's subdued first-quarter forecast has sparked concerns over the ad market outlook as economic uncertainty increases with the looming threat of global tariffs. CLOUD FOCUS Expectations are high for Google's cloud business after the segment notched its fastest growth in two years in the September quarter thanks to rising AI spending by businesses. Alphabet's shares have risen about 7% this year, following a 35% rally last year, driven by increasing investor confidence in its AI bets. Still, worries of a bigger-than-expected slowdown have mounted since last week after lackluster numbers from Microsoft, whose Azure cloud computing growth slowed in the December quarter as it prioritized AI services over core cloud offerings. "We're going to want to see if Google has the same issues that Microsoft did where AI was a source of growth, but the core hyperscaler business did poorly. We're going to want to see that that's not the case for Google," said D.A. Davidson analyst Gil Luria. Google Cloud is expected to report a 32% rise in revenue in the fourth quarter, according to LSEG data, after clocking growth of 35% in the third quarter. That would be faster than much-bigger rival Microsoft's 31% jump and an estimated 19% increase for Amazon. (Reporting by Deborah Sophia and Zaheer Kachwala in Bengaluru; Editing by Shounak Dasgupta)

Alphabet Faces Scrutiny on AI Spending as Google Cloud Growth Slows

Alphabet will face investor scrutiny over its massive spending on AI when it reports earnings on Tuesday, as revenue growth at the Google parent likely slowed in the holiday quarter due to a slowdown in its advertising and cloud businesses. Like other US technology heavyweights, Alphabet faces new scrutiny on its capital expenditure after Chinese startup DeepSeek last month launched low-cost AI models that threaten to push the AI industry into a price war. Alphabet's capital expenditure is estimated to have been $50 billion (roughly Rs. 4,35,530 crore) for last year, according to LSEG, with more planned for 2025 to support its cloud expansion and AI-driven search features, including summaries, which are vital to defending its market share and attracting more ad revenue. Microsoft and Meta Platforms executives defended their hefty AI spending plans last week, saying they were crucial to staying ahead in the new field. Meanwhile, Google Cloud growth is expected to decelerate in the fourth quarter amid high expectations for the segment. "Although (the cloud unit's) rate of growth is expected to slow, elevated investment is expected to continue, but efficiency gains have so far kept profits buoyant. Sustaining this balancing act will be a critical and investors will want to see evidence of this," said Susannah Streeter, head of money and markets, Hargreaves Lansdown. Revenue from Google's Search and Other business is expected to have risen 11.2 percent in the fourth quarter, according to Visible Alpha estimates, compared with a 12.2 percent rise in the third quarter. Overall, Alphabet's revenue is expected to grow 11.9 percent to $96.6 billion (roughly Rs. 8,41,537 crore) slower than the third quarter, according to estimates compiled by LSEG. The company - whose Search and YouTube services are used by more than 2 billion people each month - is also trying to retain its dominant share in the search advertising market amid rising competition from e-commerce firm Amazon.com and social media apps such as TikTok. Higher political ad spending around the US Presidential elections may have aided Google in the fourth quarter, after Facebook-owner Meta also reported a similar ad revenue boost. Still, Meta's subdued first-quarter forecast has sparked concerns over the ad market outlook as economic uncertainty increases with the looming threat of global tariffs. Cloud Focus Expectations are high for Google's cloud business after the segment notched its fastest growth in two years in the September quarter thanks to rising AI spending by businesses. Alphabet's shares have risen about seven percent this year, following a 35 percent rally last year, driven by increasing investor confidence in its AI bets. Still, worries of a bigger-than-expected slowdown have mounted since last week after lackluster numbers from Microsoft, whose Azure cloud computing growth slowed in the December quarter as it prioritised AI services over core cloud offerings. "We're going to want to see if Google has the same issues that Microsoft did where AI was a source of growth, but the core hyperscaler business did poorly. We're going to want to see that that's not the case for Google," said D.A. Davidson analyst Gil Luria. Google Cloud is expected to report a 32 percent rise in revenue in the fourth quarter, according to LSEG data, after clocking growth of 35 percent in the third quarter. That would be faster than much-bigger rival Microsoft's 31 percent jump and an estimated 19% increase for Amazon. © Thomson Reuters 2025

Alphabet shares fall more than 7% on revenue miss, AI investment boost

CEO of Alphabet and Google Sundar Pichai in Warsaw, Poland on March 29, 2022. Alphabet shares dropped more than 7% premarket Wednesday after the search giant fell short of Wall Street's fourth-quarter revenue expectations and announced big spending plans for its ongoing artificial intelligence buildout. The company topped earnings estimates by 2 cents per share. Revenues came in at $96.47 billion, behind the $96.56 billion expected by LSEG. Alphabet's revenues grew 12% overall from a year ago, while its YouTube advertising business, search business and services segment slowed year over year. Alphabet also said it plans to spend $75 billion on capital expenditures as it builds out its AI offerings and races against megacap rivals to build out data centers and new infrastructure. The figure was much higher than the $58.84 billion expected by Wall Street analysts, according to FactSet. Finance chief Anat Ashkenazi said the higher expenses will help "support the growth of our business across Google Services, Google Cloud and Google DeepMind." She also said the spending will go toward "technical infrastructure, primarily for servers, followed by data centers and networking."

Alphabet plans massive capex hike, reports cloud revenue growth slowed

Alphabet plans to spend $75 billion on AI buildout in 2025, significantly surpassing Wall Street's expectations. This substantial investment includes building servers and data centers. Meanwhile, the company's cloud revenue growth has slowed, raising investor concerns over profitability and capital spending efficiency.Alphabet said on Tuesday it will spend $75 billion on its AI buildout this year, 29% more than Wall Street expected, and investors signaled disappointment at a missed cloud revenue target and began showing impatience over profitability. Shares of the Google parent fell 9% in extended trading. Alphabet has gained about 9% so far this year. Wall Street had been expecting 2025 capital expenditures of about $58 billion, according to LSEG data. That would have marked a modest increase over the $52.5 billion spending in 2024. CEO Sundar Pichai defended the dramatic increase on a conference call with analysts, who are raising new questions about capital spending by Google and U.S. rivals following the emergence of China's DeepSeek, which offers cut-rate AI. He said Google's Gemini family of AI models is comparable in efficiency to DeepSeek. "The cost of actually using (AI) is going to keep coming down, which will make more use cases feasible," Pichai said. "The opportunity space is as big as it comes, and that's why you're seeing us invest to meet that moment." Still, the company posted a deceleration in cloud revenue growth. Alphabet has been spending heavily on an infrastructure development to support AI research and integration into products such as search and cloud services. The majority of capex for 2025 would go into building servers and data centers, Chief Financial Officer Anat Ashkenazi said on the call. She attributed the fourth-quarter results in part to capacity constraints on cloud AI offerings. Alphabet plans to spend $16 billion to $18 billion in the first quarter, a far bigger number than the roughly $6 million DeepSeek said it spent on the final training run to develop its AI model. To be sure, developers at leading U.S. AI firms said the total training cost was likely magnitudes larger. But revelations around DeepSeek's training cost in January shocked tech stocks, contributing to Nvidia's record one-day drop of $593 billion in market value. "It's very hard to defend Google after the earnings report," said Dave Wagner, portfolio manager at Aptus Capital Advisors, which holds Alphabet stock. He pointed to the cloud revenue miss and Google's poor track record on utilizing cash for profitability. "DeepSeek has started to teach the market that maybe some things can be done a little bit more efficiently," he said. "Maybe we're starting to see the market dislike the continued increase in capex." LEVELING OFF Google Cloud had previously grown fast enough to offset concerns around increased spending, said Brian Mulberry, client portfolio manager at Zacks Investment Management, which holds Alphabet shares. "When you start to see that revenue level off or at least the growth start to top off a little bit, how you're going to finance the future growth of the company becomes an issue," he said. Google's cloud business posted a 30% rise in revenue to $11.96 billion in the fourth quarter, slowing down from the 35% increase in the September quarter. Analysts were expecting a rise of 32.3% to $12.16 billion, according to data compiled by LSEG. The soft cloud numbers come even as Google has built out AI features within its cloud computing platform. Pichai said on the conference call that developer usage on Gemini had doubled in six months to 4.4 million users. Larger cloud rival Microsoft also reported weaker-than-expected growth in its Azure cloud platform last week. Shares of Amazon, the largest cloud provider, which will publish quarterly results on Thursday, were down 1.8% in after-hours trade. Alphabet's mainstay ad business, which represents about three-quarters of its overall revenue, has been facing rising competition as more advertisers eye social media platforms such as Meta's Facebook and Instagram or ByteDance's TikTok. Advertising revenue rose 10.6% to $72.46 billion in the fourth quarter. That beat the third quarter's 10.4% growth and topped analysts' estimates of $71.84 billion, according to LSEG. Ad revenue from YouTube grew 13.8% to $10.47 billion in the fourth quarter, compared with the 12.2% growth in the third quarter. Chief business officer Philipp Schindler said the growth was helped by U.S. election advertising, with combined spending by Democrats and Republicans nearly doubling compared with the 2020 election. The ad tech products and ad-driven search business are both facing scrutiny from U.S. regulators seeking to break up the company, though policy may change under the Trump administration. Overall, Google's revenue rose 12% to $96.47 billion in the fourth quarter, compared with the average analyst estimate of $96.56 billion, according to data compiled by LSEG. The company reported a profit of $2.15 per share, beating estimates of $2.13 per share. Search revenue rose 12.5% to $54.03 billion. Pichai said that AI Overviews, the AI-generated summaries for search queries displayed above Google's traditional links to the Web, had increased search usage. The monetization rate on ads for AI Overviews, introduced last October, was approximately the same compared to traditional search ads, chief business officer Philipp Schindler said. Self-driving car unit Waymo will debut internationally in Tokyo in the coming weeks, Pichai said.

Alphabet stock falls after missing revenue expectations despite strong momentum

What DeepSeek's AI breakthrough means for Meta, OpenAI, and Nvidia The Google parent reported revenues of $96.5 billion for the fourth quarter -- a 12% increase year over year. Alphabet reported earnings of $2.15 per share -- up 31% from the previous year, and net income of $26.5 billion for the quarter ended in December. "Q4 was a strong quarter driven by our leadership in AI and momentum across the business," Alphabet chief executive Sundar Pichai said in a statement. "We are building, testing, and launching products and models faster than ever, and making significant progress in compute and driving efficiencies." The company was expected to report revenues of $96.7 billion for the fourth quarter of 2024, according to analysts' estimates compiled by FactSet (FDS-0.23%). Net income was expected at $26.2 billion, while analysts estimated earnings of $2.13 per share. Alphabet stock was up by around 2.5% at the market close on Tuesday. After reporting the revenue miss, Alphabet shares plunged by more than 6%. The company's shares are up by 9% so far this year. Bank of America (BAC+1.35%) analysts said in a note on Friday that they were expecting Alphabet to meet or beat fourth quarter expectations "with potential upside" from its advertising business. The analysts also said they believed Wall Street "is likely underestimating potential for AIOs [AI Overviews] to drive Search monetization strength in 2025." In December, Google unveiled Gemini 2.0 -- it's "most capable" artificial intelligence model so far for the "new agentic era." Gemini 2.0's multimodal features, such as native image and audio output, "will enable us to build new AI agents that bring us closer to our vision of a universal assistant," the company said. Meanwhile, Demis Hassabis, founder of Alphabet's drug discovery subsidiary, Isomorphic Labs, said last month that its AI-designed drugs are expected to head to trial by the end of the year. "AI applied to science is a lot richer than just the language models," Hassabis, who also serves as chief executive of Google DeepMind, said during a panel at the World Economic Forum in Davos, Switzerland. "We'll hopefully have some AI-designed drugs in the clinic by the end of the year. That's the plan."

Alphabet shares fall as growth in the AI-backed cloud business slows

Alphabet has reported fourth quarter earnings that missed analysts' estimates in revenue as growth in Google Cloud slowed. Google's parent, Alphabet, missed market expectations in a key metric - Google Cloud growth - during the fourth quarter, resulting in a more than 7% drop in its share price in the extended trading hours. The company also provided guidance indicating a heavy capital expenditure of approximately $75 billion (€72.73 billion) in capital expenditures in 2025, well exceeding analysts' estimates. The selloff in Alphabet's shares suggests that investors are concerned its mounting spending on data centre is not yielding expected results. Markets had high expectations for growth in tech giants, especially following the launch of a much cheaper Chinese AI model from DeepSeek. Despite a slowdown in Google Cloud, Alphabet's core business - Google search and YouTube advertising - continued to show robust growth. CEO Sundar Pichai is optimistic about the company's prospect and commented: "Q4 was a strong quarter driven by our leadership in AI and momentum across the business ... We are confident about the opportunities ahead, and to accelerate our progress." Google Cloud generated revenue of $11.96 bn (€11.60bn) in the fourth quarter, compared with Wall Street's estimated $12.19 bn (€11.82bn). The division made an annual growth of 30%, and a sequential increase of 5.4%, slowing from 35% and 9.6%, respectively, in the previous quarter. In comparison, Microsoft reported a 31% annual growth in its cloud business last week. Google Cloud's market share continues to be behind that of the Amazon Web Services (AWS) and Microsoft's Azure. Overall revenue came in at $96.47 bn (€93.58bn), increasing 12% from the same quarter last year, but missing the estimated $96.56 bn (€93.64bn). In the third quarter, Alphabet reported a 15% growth in revenue. Its core business, Google services, which includes Google Search & other and YouTube ads rose 10% year-on-year to $84.09bn (€81.56bn). "Our AI-powered Google Cloud portfolio is seeing stronger customer demand, and YouTube continues to be the leader in streaming watchtime and podcasts. Together, Cloud and YouTube exited 2024 at an annual revenue run rate of $110 billion," said Pichai. Dividend payments to stockholders will be totalling $2.4 bn (€2.33bn) for the three months ended 31 December of 2024. Alphabet's segment, Other Bets, which includes the life sciences unit Verily and the autonomous services Waymo, generated revenue of $400m (€388m) in the fourth quarter, down 39% from the same quarter of 2023, and well below Wall Street's estimates. The segment reported an operating loss of $1.17 bn (€1.13bn) during the quarter, widening from $863m (€837m) in the previous quarter. Waymo is one of the first robotaxi services in the US, already operating on public roads in Los Angeles, Sanfrancisco and Phoenix. It is ahead of Tesla's Cybercab release and is expected to become a key player in the industry. In December, the company announced it will start testing its self-driving cars in Tokyo in early 2025, which would be the first international expansion. Recently, the self-driving unit announced plans to expand testing its services in 10 new cities including San Diego and Las Vegas, in 2025.

Google's holiday ad boost can't ease AI letdown fears

Google's digital ad sales continued to grow at a healthy clip during the holiday season, but that wasn't enough to offset investors' worries about whether its big bet on artificial intelligence will be as lucrative as once envisioned SAN FRANCISCO -- Google's digital ad sales continued to grow at a healthy clip during the holiday season, but that wasn't enough to offset investors' worries about whether its big bet on artificial intelligence will be lucrative as once envisioned. The October-December results released Tuesday by Google parent Alphabet Inc. showed the company is continuing to reap even more profits from its dominant search engine and other peripheral services. Alphabet earned $26.5 billion, or $2.15 per share, during last year's final quarter, a 28% increase from the same time during the previous year. Revenue rose 12% from the previous year to $96.5 billion. The earnings eclipsed analyst forecasts of $2.13 per share, but the revenue fell slightly below projections, according to FactSet Research. More importantly, revenue growth in the Google Cloud division tethered to the AI craze wasn't as robust as had been anticipated. That letdown contributed to a more than 8% drop in Alphabet's stock price after the numbers came out. The downturn reversed a recent rally that had elevated Alphabet's shares to a new all-time high earlier Tuesday during the regular trading session. "The reaction underscores concerns that rivals like Microsoft, with its OpenAI partnership, are better positioned to convert AI hype into revenue," said Investing.com analyst Jesse Cohen. But the AI-generated overviews that Google has been increasingly displaying in at the top of its search results appeared to be helping to bring in more advertising. Google's ad sales climbed 11% from the previous year to $72.5 billion to exceed analyst estimates. "The early signs suggest that AI is working for Google," said Jim Yu, CEO of BrightEdge, which helps websites rank higher in search results. "What it does for Google is keep more of the digital experience happening within its search engine. And by the time they send someone to another site, shoppers and readers have already gotten further down their journey. So that visitor is worth a lot more to an advertiser." But Google also has spending billions of dollars on its AI expansion, a huge investment that some investors are questioning after t he Chinese startup DeepSeek found an effective way to deploy similar technology at a fraction of the cost. Alphabet is expecting its ongoing AI expansion to increase its capital from about $60 billion last year to $75 billion this year. Alphabet CEO Sundar Pichai sought to reassure investors all that spending will pay off during a Tuesday conference call by emphasizing the way AI is helping to boost Google's fortunes by attracting more search traffic and making other services more popular. "The company is in a great rhythm and cadence, building, testing and launching products faster than ever before," Pichai said. Before the fourth-quarter results came out, Google made a change that in its AI principles signaling it may be more open to selling the technology in areas that it had previously indicated it would avoid. The revised principles removed previous commitments not to deploy AI in weaponry or surveillance that had been in place since 2018. Pichai didn't address the change during Tuesday's conference call and Google didn't immediately respond to a request for comment. The uncertainty over AI isn't the only worry hanging over Google. The Mountain View, California, company also is facing a regulatory crackdown in the U.S., by far its most lucrative market, raising the specter that its revenue could be undercut. After weighing the evidence presented during a high-profile trial, a federal judge last year declared Google's search engine is an illegal monopoly -- a decision that has opened the door for regulators to propose forcing the company to sell its Chrome web browser. Court hearings on how Google should be punished for its abuses in the search market are scheduled to begin in April, with a decision anticipated before autumn. Besides the legal assault on its search engine, Google also has been ordered to tear down the barriers protecting its Play Store for Android smartphone apps. That ruling is currently on hold while Google appeals. Google is also awaiting a ruling in antitrust trial in Virginia revolving around the technology underlying its digital ad network.

Google's $75 billion bet on AI is more than most nation's GDP -- but investors aren't impressed

Google's big spending spurs AI advancement, but DeepSeek proves that AI success doesn't require a billion-dollar price tag On Tuesday, Google's Q4 2024 earnings call revealed much about how the company plans to spend its megabucks in the year ahead. And few ambitions of expenditure stood as lofty as pouring approximately $75 billion into capital expenditures, much of which was earmarked to greatly improve AI infrastructure. That's over twice what Google spent in 2023, and rivals the projected GDP of entire countries like Panama, Uruguay, or the African nation of Ghana. However, while not all of Google's capex will be poured into investment in AI, CFO Anat Ashkenazi was clear that a "majority of that is going to go toward our technical infrastructure, which includes servers and data centers." According to Ashkenazi, "approximately $16 billion to $18 billion" of its total capex investment would take place "in the first quarter" of 2025. CEO Sundar Pichai noted that Google's sizeable investment in technical infrastructure was a necessary cost, citing increasing demands for the company's cloud AI services, stating, "Cloud customers consume more than eight times the compute capacity for training and inferencing compared to 18 months ago." This investment would not only ensure Google's ability to meet an increase in customer demand but also maintain the company's infrastructure efficiency, which, according to Pichai, is among the world's most efficient of its kind -- delivering "nearly four times more computing power per unit of electricity compared to just five years ago." It's likely that these improvements will help accommodate the training and wider rollout of more advanced models such as the Gemini 2.0 Flash 'thinking model,' which will become generally available for developers and customers today, joining a spate of recently launched reasoning models including the o1-powered Think Deeper for Copilot and DeepSeek-R1. The latter of which was directly referenced by Pichai, who stated that the "tremendous team" behind the Chinese startup had done "very, very good work," when fielding a query from Goldman Sachs analyst Eric Sheridan on investors raising questions about the long-term cost curve for AI. DeepSeek made shockwaves in January after revealing it had trained one of its latest V3 models for less than $6 million, and revealed some of the most competitive API pricing seen to date, costing only 55 cents per million tokens -- some 96% less than the $15 per million tokens charged by OpenAI while providing similar levels of performance and accuracy. However, despite DeekSeek's impact on of the AI market last month (which effectively saw almost $600 billion knocked off of Nvidia's valuation overnight), Pichai insists that not only is Google's AI "more efficient" in cost, latency, and performance, but that a return on the investment in AI could pay off as the company explores "very good ideas for native ad concepts" and making AI tools more accessible for business in an effort to sell AI-driven efficiencies to companies at scale. That said, Pichai's optimism that its capex investment would be "directly driving revenue" doesn't seem to have landed. Following the earnings call, Bloomberg reported that shares for Google's parent company Alphabet dipped by roughly 7% in premarket trading on Wednesday, effectively eliminating much of its 9% gain in 2025 -- despite cloud services contributing $11.4 billion to the company's $96.5 billion revenue total for Q4. While Alphabet insists its capex investment is necessary to hold the lead in Search and AI, a stock drop like this suggests that Wall Street isn't convinced. The company wants Google to spend big, but markets reward those who spend smart. DeepSeek's arrival onto (and major upset of) the AI scene has raised a question Alphabet may already be feeling the impact of, as investors ask whether endless scaling in compute truly is the only path forward, as companies like Google, Microsoft, and OpenAI have claimed.

Alphabet Revenue Disappoints on Weak Cloud Sales

Sign up for the On Tech newsletter. Get our best tech reporting from the week. Get it sent to your inbox. Alphabet, Google's parent company, reported sales that narrowly fell short of Wall Street's expectations, weighed down by disappointing growth in the company's cloud-computing division, which sells the company's artificial intelligence tools to other businesses. The Silicon Valley giant reported revenue of $95.5 billion in its most recent quarter, an increase of 12 percent from a year earlier, but short of the $96.6 billion that Wall Street analysts had expected. Profit was $26.5 billion, a 28 percent increase that narrowly beat analysts' estimate of $26 billion. Google's cloud division has become an essential component of the company's move to generative artificial intelligence, the technology that has created a spending boom in Silicon Valley and beyond. Google Cloud's sales were $11.95 billion in the fourth quarter, an increase of 30 percent from a year earlier, but short of the $12.2 billion that analysts had expected. The results raise questions about whether A.I. will prove an advantage for Google Cloud, which remains smaller than competing services from Amazon and Microsoft. Alphabet has invested an enormous amount to try to bolster its A.I. offerings, amid investor concerns that American companies may be spending too much on A.I. relative to their Chinese counterparts. The internet giant announced it would spend $75 billion in capital expenditures in 2025, an acceleration from last year. Alphabet's stock tumbled 6 percent in aftermarket trading. The Chinese A.I. start-up DeepSeek caused American markets to quake last week after its chatbot app soared in popularity. DeepSeek has said it trained its system for just $6 million, a fraction of what tech giants like Google spend. Alphabet's stock took a hit, among many others, though it has recovered. Tech industry insiders have since questioned some of DeepSeek's claims. Still, the episode highlighted Alphabet's crucial need to get A.I. right, in order to keep its digital services relevant to consumers and businesses that have never been more spoiled for choices. Google's search engine, seen as vulnerable to shifting A.I. trends since OpenAI's ChatGPT took the world by storm in 2022, is so far holding strong. It remains the world's most popular search product and in the fourth quarter, generated $54 billion in revenue. Analysts had expected $53.4 billion. As Alphabet continues to invest in A.I., it has also continued efforts to cut other costs, including through work force reductions. Last week, the company said it offered voluntary buyouts to employees in its Platforms and Devices department, which is responsible for its Chrome web browser and Pixel smartphones. The company also cut almost two dozen roles at YouTube this week, according to an email viewed by The New York Times. Advertising sales at YouTube climbed 14 percent to $10.5 billion, above the $10.2 billion expected by analysts.

Alphabet Falls on Cloud Growth Fears | The Motley Fool

Alphabet's fourth-quarter financials showed solid gains. Overall sales growth of 12% came in just shy of the consensus forecast among those following the stock, with Google Search, YouTube, and various other services helping to produce consistent growth. Net income climbed 28% year over year, and a modest decline in outstanding shares helped boost earnings-per-share figures at an even faster 31% rate. Many investors are watching the Google Cloud business closely, seeing it as the main growth driver to offset any competitive challenges to Alphabet's core search business. Gains of 30% in segment revenue reflected the success of the Google Cloud Platform and various new initiatives, including artificial intelligence infrastructure and generative AI solutions. However, Alphabet shareholders had anticipated Google Cloud revenue well above the $12 billion mark, making the actual figures a bit of a disappointment. Investors weren't pleased with Alphabet's missed targets. The tech stock moved sharply lower, down as much as 7% in the first half hour of the after-hours session following the close of regular trading Tuesday afternoon. However, the news from Alphabet wasn't all that surprising in the context of recent events. Rival Microsoft (MSFT 0.35%) also had trouble meeting high expectations from Wall Street for its cloud business when it released its own quarterly report last week. Even with the after-hours declines, Alphabet shares still trade slightly higher than where they started the year. Stocks rise and fall in the short run based on quarterly results, but Alphabet still seems to be participating fully in the AI boom. CEO Sundar Pichai called out Alphabet's AI leadership, including AI-driven search overviews and the pervasiveness of artificial intelligence-related features across Alphabet's product and services suite. AI initiatives won't come cheap, though, as Pichai predicted capital expenditures of $75 billion in 2025. For now, most investors are happy to see Alphabet participating fully in AI expansion. At some point, though, the tech company will have to prove that those steep investments will pay off with lasting positive results. That's what long-term investors in Alphabet need to watch for in the years ahead.

Google's rising holiday season ad sales not enough to ease AI worries | BreakingNews.ie

Google's digital ad sales continued to grow at a healthy clip during the holiday season, but that was not enough to offset investors' worries about whether its big bet on artificial intelligence will be as lucrative as once envisioned. The October-December results released on Tuesday by Google parent Alphabet Inc showed the company is continuing to reap even more profits from its dominant search engine and other peripheral services. Alphabet earned 26.5 billion dollars (£21.2 billion), or two dollars and 15 cents per share, during last year's final quarter, a 28% increase from the same time during the previous year. Revenue rose 12% from the previous year to 96.5 billion (£77.2 billion). The earnings eclipsed analyst forecasts of two dollars and 13 cents per share, but the revenue fell slightly below projections, according to FactSet Research. More importantly, revenue growth in the Google Cloud division tethered to the AI craze was not as robust as had been anticipated. That letdown contributed to a more than 8% drop in Alphabet's stock price after the numbers came out. The downturn reversed a recent rally that had elevated Alphabet's shares to a new all-time high earlier on Tuesday during the regular trading session. "The reaction underscores concerns that rivals like Microsoft, with its OpenAI partnership, are better positioned to convert AI hype into revenue," said Investing.com analyst Jesse Cohen. But the AI-generated overviews that Google has been increasingly displaying in at the top of its search results appeared to be helping to bring in more advertising. Google's ad sales climbed 11% from the previous year to 72.5 billion dollars (£58 billion) to exceed analyst estimates. "The early signs suggest that AI is working for Google," said Jim Yu, chief executive of BrightEdge, which helps websites rank higher in search results. "What it does for Google is keep more of the digital experience happening within its search engine. And by the time they send someone to another site, shoppers and readers have already gotten further down their journey. So that visitor is worth a lot more to an advertiser." But Google also has been spending billions of dollars on its AI expansion, a huge investment that some investors are questioning after the Chinese start-up DeepSeek found an effective way to deploy similar technology at a fraction of the cost. Alphabet is expecting its ongoing AI expansion to increase its capital from about 60 billion dollars last year to 75 billion dollars this year. Alphabet chief executive Sundar Pichai sought to reassure investors all that spending will pay off during a Tuesday conference call by emphasising the way AI is helping to boost Google's fortunes by attracting more search traffic and making other services more popular. "The company is in a great rhythm and cadence, building, testing and launching products faster than ever before," Mr Pichai said. Before the fourth-quarter results came out, Google made a change in its AI principles signalling it may be more open to selling the technology in areas that it had previously indicated it would avoid. The revised principles removed previous commitments not to deploy AI in weaponry or surveillance that had been in place since 2018. Mr Pichai did not address the change during Tuesday's conference call and Google did not immediately respond to a request for comment. The uncertainty over AI is not the only worry hanging over Google. The Mountain View, California company also is facing a regulatory crackdown in the US, by far its most lucrative market, raising the spectre that its revenue could be undercut. After weighing the evidence presented during a high-profile trial, a federal judge last year declared Google's search engine is an illegal monopoly -- a decision that has opened the door for regulators to propose forcing the company to sell its Chrome web browser. Court hearings on how Google should be punished for its abuses in the search market are scheduled to begin in April, with a decision anticipated before autumn. Besides the legal assault on its search engine, Google also has been ordered to tear down the barriers protecting its Play Store for Android smartphone apps. That ruling is currently on hold while Google appeals. Google is also awaiting a ruling in an antitrust trial in Virginia revolving around the technology underlying its digital ad network.

Google-Parent Alphabet Plunges 7% In Wednesday Pre-Market: What's Going On? Alphabet Plunges 7% In Pre-Market As Cloud Revenue Disappoints And AI Spending Surges - Alphabet (NASDAQ:GOOG), Amazon.com (NASDAQ:AMZN)

The Class A and Class C shares of Alphabet Inc. GOOG GOOGL plunged 7.10 % and 6.9% respectively in pre-market hours trading on Wednesday following the company's fourth-quarter earnings announcement on Feb. 5. What Happened: Despite reporting revenue growth, Alphabet's cloud revenue fell short of market expectations, while AI spending saw a significant increase. Alphabet, Google's parent company, announced a 12% year-over-year rise in consolidated revenue, reaching $96.5 billion, fueled by strong business growth. Revenue from Google Services climbed 10% to $84.1 billion, led by sustained strength in Google Search, YouTube ads, and other advertising segments. However, Alphabet's cloud computing division, reported a 30% year-over-year (YoY) growth reaching $11.96 billion, falling short of market expectations of $12.19 billion. CFO Anat Ashkenazi cited capacity limitations as the reason for the lower-than-anticipated performance in cloud-based AI services. Alphabet also revealed plans to invest $75 billion in capital expenditures in 2025, marking a 29% increase over analyst projections, mainly to enhance its artificial intelligence (AI) infrastructure. This announcement sparked investor concerns, especially given the rise of cost-efficient AI models from China's DeepSeek. CEO, Sundar Pichai justified the rise in spending, emphasizing that Alphabet must expand its AI capabilities to stay competitive. Alphabet's AI-powered search features have been achieving monetization rates comparable to traditional search results, marking a milestone in the company's AI strategy. Pichai also hinted at potential future monetization strategies for Gemini AI, including the introduction of ads. Despite the progress made by China's DeepSeek, CEO Sundar Pichai stated that Google's Gemini remains ahead in efficiency, cost, and performance. SEE ALSO: Google's Gemini AI Could Soon Include Ads -- Sundar Pichai Hints At Future Monetization Beyond Subscriptions Why It Matters: The results suggest that Alphabet is still encountering challenges, particularly in its Google Cloud segment, a central part of its growth strategy. This includes growing competition in the cloud services market from rivals such as Microsoft MSFT and Amazon AMZN. The company also continues to face regulatory scrutiny in the U.S. and China, further raising investor concerns. During the past 12 months, GOOG has surged over 44% on the back of overall investor confidence. READ MORE: Google's Fight Against Epic Games' Antitrust Win Hits Roadblock -- Judges Tell Search Giant Apple Case Doesn't Apply AMZNAmazon.com Inc$238.50-1.47%Overview Rating:Good62.5%Technicals Analysis1000100Financials Analysis400100WatchlistOverviewGOOGAlphabet Inc$193.55-6.82%GOOGLAlphabet Inc$191.69-7.12%MSFTMicrosoft Corp$410.47-0.46%QQQInvesco QQQ Trust, Series 1$520.08-0.84%Market News and Data brought to you by Benzinga APIs

Google's ad sales rose at robust rate in holiday season, but AI-driven numbers let down investors

SAN FRANCISCO (AP) -- Google's digital ad sales continued to grow at a healthy clip during the holiday season, but that wasn't enough to offset investors' worries about whether its big bet on artificial intelligence will yield as big a jackpot as once envisioned. The October-December results released Tuesday by Google parent Alphabet Inc. showed the company is continuing to reap even more profits from its dominant search engine and other peripheral services. Alphabet earned $26.5 billion, or $2.15 per share, during last year's final quarter, a 28% increase from the same time during the previous year. Revenue rose 12% from the previous year to $96.5 billion. The earnings eclipsed analyst forecasts of $2.13 per share, but the revenue fell slightly below projections, according to FactSet Research. More importantly, revenue growth in the Google Cloud division tethered to the AI craze wasn't as robust as had been anticipated. That letdown contributed to a more than 6% drop in Alphabet's stock price after the numbers came out. But the AI-generated summaries that Google has been increasingly displaying in at the top of its search results appeared to be helping to bring in more advertising. Google's ad sales climbed 11% from the previous year to $72.5 billion to exceed analyst estimates. "The early signs suggest that AI is working for Google," said Jim Yu, CEO of BrightEdge, which helps websites rank higher in search results. "What it does for Google is keep more of the digital experience happening within its search engine. And by the time they send someone to another site, shoppers and readers have already gotten further down their journey. So that visitor is worth a lot more to an advertiser." But Google also has spending billions of dollars on its AI expansion, a huge investment that some investors are questioning after t he Chinese startup DeepSeek found an effective way to deploy similar technology at a fraction of the cost. Google also is facing a regulatory crackdown in the U.S., by far its most lucrative market, raising the specter that its revenue could be undercut. After weighing the evidence presented during a high-profile trial, a federal judge last year declared Google's search engine is an illegal monopoly -- a decision that has opened the door for regulators to propose forcing the company to sell its Chrome web browser. Court hearings on how Google should be punished for its abuses in the search market are scheduled to begin in April, with a decision anticipated before autumn. Besides the legal assault on its search engine, Google also has been ordered to tear down the barriers protecting its Play Store for Android smartphone apps. That ruling is currently on hold while Google appeals. Google is also awaiting a ruling in antitrust trial in Virginia revolving around the technology underlying its digital ad network.

Google Parent Alphabet Plans to Spend $75B This Year, as Big Tech Goes All in on AI

The announcement comes after Microsoft and Meta also said they would commit tens of billions of dollars in capital expenditures to support their AI ambitions. Google parent Alphabet (GOOGL) said it plans to invest $75 billion in capital expenditures this year, as it joins Big Tech rivals in accelerating spending on artificial intelligence infrastructure. On the company's fourth-quarter earnings call, CFO Anat Ashkenazi said a majority of that spending would "go towards our technical infrastructure, which includes servers and data centers," with $16 billion to $18 billion expected in the first quarter. The investment is needed to keep up with demand for AI, CEO Sundar Pichai said, with Google Cloud customers consuming more than eight times the compute capacity they did 18 months ago. The announcement comes just days after Meta (META) and Microsoft (MSFT) also committed tens of billions of dollars to capital expenditures this year as they build out their AI infrastructure. Last week, Meta said it plans to invest $60 billion to $65 billion this year, while Microsoft said it plans to spend $80 billion on infrastructure in its 2025 fiscal year. The major capital commitments also come as the emergence of competition from Chinese firms like AI startup DeepSeek set in motion what Bank of America analysts are saying could be "AI's Sputnik moment." The analysts suggested DeepSeek, which claimed to develop an AI model rivaling American ones for a fraction of the cost, could push U.S. hyperscalers like Alphabet, Microsoft, and Amazon (AMZN) to spend even more on AI. Amazon is expected to report fourth-quarter earnings after the market closes Thursday. Greater AI spending from Alphabet and its peers could be good news for chipmakers like Nvidia (NVDA), which received a shoutout from Pichai during Alphabet's earnings call. Pichai said Alphabet intends to continue its "strong relationship" with Nvidia, after announcing its first customer running on Nvidia's Blackwell platform last week. Shares of Alphabet fell nearly 8% in extended trading Tuesday after the tech giant's fourth-quarter cloud revenue missed analysts' expectations. The stock had closed at a record high of $206.38, and added about 43% over the past 12 months through Tuesday's close.

Alphabet Likely to Face Investor Questions About AI-Related Capital Expenditures | PYMNTS.com

When Google parent company Alphabet reports earnings Tuesday (Feb. 4), it is reportedly likely to face questions from investors about the amount it is spending on artificial intelligence (AI). The company is estimated to have spent $50 billion on AI in 2024 and is expected to spend more in 2025, Reuters reported Monday (Feb. 3). Tuesday's earnings report is expected to show that the company's revenue growth slowed during the past quarter due to a slowdown in its advertising and cloud businesses, the report said. In addition, January saw the launch of low-cost AI models by Chinese startup DeepSeek, which may cause a price war in the AI industry, per the report. The combination of challenges to revenue growth and elevated investment in AI is likely to lead to scrutiny by investors during the earnings call, according to the report. Other companies investing in AI have faced similar questions. During Meta's Wednesday (Jan. 29) earnings call, CEO Mark Zuckerberg said it is too soon to tell whether the innovations of DeepSeek's lower-cost AI model mean it's time to reduce AI infrastructure spending. "It's probably too early to really have a strong opinion on what this means for the trajectory around infrastructure and capex," Zuckerberg said. Days earlier, on Jan. 24, Zuckerberg said on his Facebook page that Meta is investing $60 billion to $65 billion in capital expenditures. That's up from $38 billion in 2024. Zuckerberg said more computing power is needed for Meta AI, the company's AI assistant that has been deployed in its social media and devices and is now serving over a billion people. Microsoft held an earnings call Thursday (Jan. 30) in which CEO Satya Nadella said that "DeepSeek has had some real innovations" but that the AI industry has become more efficient and lowered prices as well. When the cost to use deployed AI models (inference) comes down, "that means people consume more, and there will be more apps written," Nadella said. "That type of optimization means AI will be much more ubiquitous." "Therefore, for a hyperscaler like us, a PC platform provider like us, this is all good news as far as I'm concerned," Nadella said.

Google's Ad Sales Rose at Robust Rate in Holiday Season, but AI-Driven Numbers Let Down Investors

SAN FRANCISCO (AP) -- Google's digital ad sales continued to grow at a healthy clip during the holiday season, but that wasn't enough to offset investors' worries about whether its big bet on artificial intelligence will yield as big a jackpot as once envisioned. The October-December results released Tuesday by Google parent Alphabet Inc. showed the company is continuing to reap even more profits from its dominant search engine and other peripheral services. Alphabet earned $26.5 billion, or $2.15 per share, during last year's final quarter, a 28% increase from the same time during the previous year. Revenue rose 12% from the previous year to $96.5 billion. The earnings eclipsed analyst forecasts of $2.13 per share, but the revenue fell slightly below projections, according to FactSet Research. More importantly, revenue growth in the Google Cloud division tethered to the AI craze wasn't as robust as had been anticipated. That letdown contributed to a more than 6% drop in Alphabet's stock price after the numbers came out. But the AI-generated summaries that Google has been increasingly displaying in at the top of its search results appeared to be helping to bring in more advertising. Google's ad sales climbed 11% from the previous year to $72.5 billion to exceed analyst estimates. "The early signs suggest that AI is working for Google," said Jim Yu, CEO of BrightEdge, which helps websites rank higher in search results. "What it does for Google is keep more of the digital experience happening within its search engine. And by the time they send someone to another site, shoppers and readers have already gotten further down their journey. So that visitor is worth a lot more to an advertiser." But Google also has spending billions of dollars on its AI expansion, a huge investment that some investors are questioning after t he Chinese startup DeepSeek found an effective way to deploy similar technology at a fraction of the cost. Google also is facing a regulatory crackdown in the U.S., by far its most lucrative market, raising the specter that its revenue could be undercut. After weighing the evidence presented during a high-profile trial, a federal judge last year declared Google's search engine is an illegal monopoly -- a decision that has opened the door for regulators to propose forcing the company to sell its Chrome web browser. Court hearings on how Google should be punished for its abuses in the search market are scheduled to begin in April, with a decision anticipated before autumn. Besides the legal assault on its search engine, Google also has been ordered to tear down the barriers protecting its Play Store for Android smartphone apps. That ruling is currently on hold while Google appeals. Google is also awaiting a ruling in antitrust trial in Virginia revolving around the technology underlying its digital ad network. Copyright 2025 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Alphabet Slides After Cloud Sales Fall Short of Expectations

(Bloomberg) -- Google parent Alphabet Inc. posted fourth-quarter revenue that missed analysts' expectations as growth in its cloud business slowed. The shares fell more than 8%. Sales, excluding partner payouts, were $81.6 billion, Alphabet said Tuesday in a statement. Analysts had projected $82.8 billion, according to data compiled by Bloomberg. The company also projected $75 billion in 2025 capital expenditures, far exceeding the $57.9 billion that analysts expected, related to a buildout of data centers and infrastructure for artificial intelligence. That led to a more than 6% boost in Broadcom Inc. shares. Investors have urged Alphabet to demonstrate that it is maintaining momentum across its businesses as it spends more heavily on AI, and as competition in that market intensifies. Google's cloud unit had benefited from the AI boom as startups required more computing power for their work, but sales of about $12 billion in the period ended Dec. 31 missed estimates. Google Cloud still trails behind Amazon.com Inc. and Microsoft Corp. in size. Alphabet fell as low as $189.40 in extended trading, after closing at $206.38. The shares have gained 9% so far this year.

Alphabet Q4 Earnings Highlights: AI, Cloud, YouTube Momentum Continues, $75 Billion CapEx Guidance Spooks Investors - Alphabet (NASDAQ:GOOGL)

AI, Cloud and YouTube segments show strong momentum, the company says. Tech giant Alphabet Inc GOOGGOOGL reported fourth-quarter financial results after the market close Tuesday. Here are the key highlights. What Happened: Alphabet announced fourth-quarter total revenue of $96.5 billion, up 12% year-over-year. The revenue total missed a Street consensus estimate of $96.6 billion, according to data from Benzinga Pro. The company reported fourth-quarter earnings per share of $2.15, beating a Street consensus estimate of $2.12. Alphabet said it saw "robust momentum across the business." Google Services revenues were up 10% year-over-year to $84.1 billion, with strong momentum for Google Search and YouTube ads, the company said. Google Cloud revenue was up 30% year-over-year to $12 billion. Revenue was broken down as follows in the fourth quarter, with the prior year's total in parentheses: Google Search: $54 billion ($48 billion) YouTube ads: $10.5 billion ($9.2 billion) Google Network: $8 billion ($8.3 billion) Total Google Advertising: $72.5 billion ($65.5 billion) The company's Google subscriptions, platforms and devices revenue was $11.6 billion compared to $10.8 billion in last year's fourth quarter. Adding those items together makes up Google Services, which had revenue of $84.1 billion, up from $76.3 billion in last year's fourth quarter. Google Cloud revenue was $12 billion compared to $9.2 billion in last year's fourth quarter. Full fiscal year revenue was $350 billion, up 14% year-over-year. Read Also: Alphabet Q4 Earnings Preview: AI, YouTube, DOJ Case Key Items To Watch What's Next: Alphabet CEO Sundar Pichai said the fourth quarter was driven by leadership in AI and momentum across the business. "We are building, testing, and launching products and models faster than ever, and making significant progress in compute and driving efficiencies," Pichai said. Pichai said the company is seeing stronger customer demand for AI-powered Google Cloud and YouTube continues to be a leader in streaming watchtime. "Together, Cloud and YouTube exited 2024 at an annual run rate of $110 billion. Our results show the power of our differentiated full-stack approach to AI innovation and the continued strength of our core business." The company said it expects to have capital expenditures of $75 billion in 2025. GOOGL Price Action: Alphabet stock is down 7% to $191.90 in after-hours trading versus a 52-week trading range of $130.66 to $207.05. Alphabet shares hit new all-time highs earlier in Tuesday's intraday trading session. Shares closed 2.6% higher at $206.38 on Tuesday. Read Next: Alphabet Q4 Earnings Preview: Bullish Trend Just Getting Started? Photo via Shutterstock. GOOGLAlphabet Inc$191.98-4.60%Overview Rating:Good62.5%Technicals Analysis1000100Financials Analysis400100WatchlistOverviewGOOGAlphabet Inc$193.68-4.42%Market News and Data brought to you by Benzinga APIs

Google boss expects to spend $75B on AI this year

Google CEO Sundar Pichai expects his company to invest around $75 billion in capital expenditures in 2025 to boost artificial intelligence offerings. "We expect to invest approximately $75 billion in capital expenditures in 2025," Pichai said in a statement in Google parent Alphabet's fourth-quarter 2024 earnings report. The figure is a 43% increase from the firm's $32.3 billion capital expenditures in 2023. He said the investment would "accelerate progress" in AI innovation and continue to strengthen the company's core businesses. Capital expenditures -- sometimes referred to as "capex" -- are funds used to purchase long-term physical or fixed assets in business operations. It's not clear exactly how much of the investment is earmarked for AI, but it's expected that most of it will be funneled into expanding Google's AI infrastructure. Other Big Tech firms have increased spending on AI-related projects, including Meta, which said it would spend $65 billion to expand its AI infrastructure. AI has been one of Google's strongest revenue streams in the last few years, with overall revenue up 12% year-over-year at $96.5 billion. Meanwhile, Google Cloud revenue jumped 10% to $12 billion in the same time frame, something Google said had been supported by consistent growth across "core Google Cloud Platform products, AI Infrastructure and Generative AI Solutions." However, Alphabet's total revenue fell short of combined analyst expectations of $96.7 billion, and its share price fell more than 7% in after-hours trading, according to Yahoo Finance. Related: Google exposes government-backed misuse of Gemini AI In a Feb. 4 investor call, Pichai downplayed the risks posed by new competitors, including the China-based AI model DeepSeek, which shook the market in late January. Pichai told listeners of the call that Google's Gemini 2.0 Flash models are "some of the most efficient models out there," even when compared to DeepSeek's v3 and R1 models. On Jan. 27, DeepSeek spooked US markets with news that the model's developers were able to produce a worthy competitor to American AI firms such as OpenAI at a fraction of the cost. The firm claims it was able to develop its AI model on a shoestring budget of just under $6 million using less advanced hardware from semiconductor manufacturer Nvidia.

Alphabet outlines $75B CapEx for 2025 with focus on AI and cloud infrastructure (NASDAQ:GOOG)

Sundar Pichai, CEO, highlighted strong Q4 performance driven by AI advancements and a combined annual revenue run rate of $110 billion for Google Cloud and YouTube. He emphasized progress in AI infrastructure, such as Gemini 2.0 Seeking Alpha's Disclaimer: The earnings call insights are compilations of earnings call transcripts and other content available on the Seeking Alpha website. The insights are generated by an AI tool and have not been curated or reviewed by editors. Due to inherent limitations in using AI-based tools, the accuracy, completeness, or timeliness of the earnings call insights cannot be guaranteed. Please see full earnings call transcripts here. The earnings call insights are intended for informational purposes only. Seeking Alpha does not take account of your objectives or your financial situation and does not offer any personalized investment advice. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank.

Google expects to spend $75 billion this year on the AI race

Capital expenditures have become a hot topic as of late as big tech companies race to build infrastructure to support their growing AI ambitions, and today's announcement from Alphabet is clearly meant to keep the company in that conversation. Alphabet spent $32.3 billion on capital expenditures in 2023, so $75 billion in 2025 would be a big jump. And while Google's press release today doesn't specifically say that the upcoming capital expenditures are all for AI, given the amount of money flowing into AI infrastructure across the industry, it seems likely that a good amount of the expense will go toward benefitting Google's AI work.