Alphabet announced a $75 billion investment in AI for 2025, 29% higher than Wall Street’s expectations, causing investor disappointment due to missed cloud revenue targets and slower profitability growth. Shares dropped 9% after-hours, despite the company’s 9% year-to-date gain.
CEO Sundar Pichai defended the increase in capital expenditures, citing the vast potential of AI and Google’s Gemini AI models, which he claims are as efficient as China’s DeepSeek, a cut-rate AI competitor. However, Alphabet’s cloud revenue growth decelerated, rising 30% to $11.96 billion in Q4, below analysts’ forecast of $12.16 billion. The company plans significant spending in the first quarter for infrastructure, including building servers and data centers.
Analysts have expressed concerns over Alphabet’s rising capex, especially in light of DeepSeek’s efficient training methods, which shocked the market earlier this year. Despite this, Alphabet’s advertising business showed strong results, with Q4 ad revenue increasing 10.6% to $72.46 billion. YouTube’s ad revenue rose 13.8%, boosted by U.S. election-related spending.
Overall, Alphabet’s Q4 revenue grew 12% to $96.47 billion, just shy of estimates. The company reported a profit of $2.15 per share, slightly above analyst expectations. Pichai also mentioned that Google’s self-driving car unit, Waymo, will soon debut internationally in Tokyo.
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