Alphabet, the parent company of Google (GOOGL), reported strong fourth-quarter earnings, but its cloud revenue fell short of expectations, causing a dip in its stock during extended trading on Tuesday.
Strong Earnings, Cloud Revenue Misses Expectations
Alphabet’s revenue rose 12% year-over-year, reaching $96.47 billion, which matched analyst expectations. The company’s earnings hit $26.54 billion, or $2.15 per share, up from $20.69 billion, or $1.64 per share, in the same period last year, beating projections.
However, Google Cloud’s revenue growth of 30%, reaching $11.96 billion, missed analysts’ estimates. Additionally, Google’s Search & Other segment revenue came in at $54.03 billion, also falling short of expectations.
Alphabet’s $75 Billion Investment in AI
Alphabet’s CEO, Sundar Pichai, revealed plans to invest around $75 billion in capital expenditures in 2025 to accelerate the company’s growth, particularly in artificial intelligence (AI). CFO Anat Ashkenazi added that between $16 billion and $18 billion of this investment will be allocated to the first quarter of 2025, with most of the funds earmarked for expanding infrastructure, such as servers and data centers.
Pichai noted that Google Cloud customers are now using more than eight times the compute capacity compared to a year and a half ago, highlighting the need for ongoing investments to meet growing demand.
The company also praised Nvidia (NVDA), a leader in AI chip manufacturing, after announcing its first customer running on Nvidia’s Blackwell platform.
Challenges from Competitors and Regulatory Issues
The results come amid growing concerns about competition from Chinese tech firms. A cost-effective AI model from Chinese startup DeepSeek has raised questions about the competitiveness of U.S. companies in the rapidly evolving sector.
In addition, Chinese regulators launched an antitrust investigation into Google in response to the new U.S. tariffs taking effect. Most of Google’s services, including Gmail and YouTube, are already banned in China.
Stock Decline After Earnings Call
Following the earnings call, Alphabet’s Class A shares dropped nearly 8% in extended trading. Despite this, the stock had reached a record high of $206.38 earlier in the day, reflecting a 43% increase over the past 12 months.
Related topics:
