Alphabet is under investor scrutiny ahead of its earnings report on Tuesday, as revenue growth is expected to slow in the holiday quarter due to a dip in its advertising and cloud businesses. The tech giant’s significant AI investments are at the forefront of concerns, with analysts forecasting $50 billion in capital expenditure for 2024, including a hefty portion to support cloud expansion and AI-driven search features vital to maintaining market share.
The competition in AI is intensifying, with Chinese startup DeepSeek’s low-cost models threatening to spark a price war in the sector. Alphabet’s heavy spending on AI follows similar moves by Microsoft and Meta Platforms, both of which defend their investments as essential to staying competitive.
Google’s cloud growth is also projected to decelerate in Q4, with analysts anticipating a 32% rise in Google Cloud revenue, down from the previous quarter’s 35% growth. Despite slowing growth, cloud investment is expected to remain high. However, investors are seeking evidence that Alphabet can balance heavy capital spending with efficiency gains to protect profitability, as competition from Amazon and TikTok continues to rise.
Revenue from Alphabet’s Search and Other business is expected to rise 11.2% in Q4, a slowdown from Q3’s 12.2% growth. Despite concerns over the advertising market due to global tariffs and economic uncertainty, higher political ad spending around the U.S. elections may have boosted Google’s performance.
With shares up 7% this year following a 35% gain in 2024, Alphabet’s future hinges on its ability to navigate the AI and cloud sector’s evolving dynamics.
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