Alphabet announced a $75 billion investment in AI, exceeding expectations, but its cloud revenue fell short. Shares dropped over 7%. Google's Cloud business reported a 30% revenue increase, slowing from the previous quarter, despite incorporating AI features. While digital advertising revenue grew, investors remain concerned about competition and the potential impact of AI chatbots on search.
Alphabet announced on Tuesday a significant investment of $75 billion in its artificial intelligence (AI) development this year, exceeding Wall Street's expectations by 29%. Despite this substantial commitment to AI, the company's cloud revenue fell short of analysts' predictions. In extended trading, Alphabet 's shares plummeted over 7%. Year-to-date, Alphabet 's stock has gained approximately 9%. Google's Cloud business witnessed a 30% surge in revenue to $11.
96 billion during the fourth quarter, marking a deceleration from the 35% growth observed in the September quarter. Analysts, according to LSEG data, had projected capital expenditures of around $58 billion for 2025, representing a modest increase from the $52.5 billion spent in 2024. Alphabet has been aggressively investing in infrastructure to support its AI research and integration into products like search and cloud services. However, investors are increasingly concerned about escalating costs and the potential for users to gravitate towards rival chatbots such as ChatGPT for their search needs.Alphabet's digital advertising revenue, which constitutes approximately three-quarters of the company's overall revenue, expanded by 10.6% to reach $72.46 billion in the fourth quarter. This outpaced the third quarter's 10.4% growth and surpassed analysts' estimates of $71.84 billion, as reported by LSEG. YouTube's ad revenue grew by 13.8% to $10.47 billion during the fourth quarter, compared to the 12.2% growth recorded in the third quarter. Chief business officer Philipp Schindler attributed this growth during the conference call to election advertising, with combined spending by both Democrats and Republicans nearly doubling compared to the 2020 election. Alphabet's core advertising business faces mounting competition as advertisers increasingly explore platforms like Meta's Facebook and Instagram or ByteDance's TikTok. Google's cloud business, despite incorporating AI features within its platform, reported a 30% revenue increase to $11.96 billion in the fourth quarter, a slowdown from the previous quarter's 35% growth. Sundar Pichai, CEO of Alphabet, stated during the conference call that developer usage on the Gemini family of large language models had doubled in six months to 4.4 million users. Microsoft's Azure cloud platform also reported weaker-than-expected growth last week. Shares of Amazon, the largest cloud provider, which will release its quarterly earnings on Thursday, dipped 1.8% in after-hours trading. Google's overall revenue climbed 12% to $96.47 billion in the fourth quarter, slightly below the average analyst estimate of $96.56 billion, based on LSEG data. The company reported a profit of $2.15 per share, exceeding estimates of $2.13 per share. Search revenue increased by 12.5% to $54.03 billion. Investors remain apprehensive that users switching to AI chatbots like ChatGPT for searches could potentially dampen this segment of Google's business in the coming quarters. Pichai stated that AI Overviews, AI-generated summaries displayed above Google's traditional links to web pages, have contributed to increased search usage
AI Alphabet Google Cloud Digital Advertising Search Chatgpt Competition Revenue Earnings
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