Alphabet’s stock fell 7.2%, marking its worst session since January 2024, after the company missed fourth-quarter revenue expectations and unveiled significant investment plans for AI infrastructure. While earnings per share exceeded estimates by 2 cents, total revenue reached $96.47 billion, slightly below Wall Street’s projection of $96.56 billion.
Despite 12% annual revenue growth, Alphabet’s YouTube advertising, search business, and services segment showed signs of slowing. At the same time, the company announced plans to spend $75 billion on capital expenditures in 2025, significantly higher than the $58.84 billion expected by analysts. This increased spending is aimed at expanding Google Cloud, Google DeepMind, and technical infrastructure, with funds allocated to servers, data centers, and networking.
Alphabet’s finance chief, Anat Ashkenazi, defended the spending increase, stating that it is necessary to support business growth across key areas. The company anticipates capital expenditures between $16 billion and $18 billion per quarter, exceeding analysts’ estimates of $14.3 billion.
Analysts reacted negatively to the report, citing concerns over higher costs, capital expenditures, and cloud revenue performance. JPMorgan analyst Doug Anmuth identified these factors as the primary reasons for Alphabet’s stock decline. Bernstein analyst Mark Shmulik emphasized that Google Cloud’s growth has now impacted stock performance for three consecutive quarters, raising investor concerns.
Shmulik compared Google’s digital ad growth to a long drive in golf, highlighting its continued strength in Search and YouTube advertising. However, as competition shifts toward AI-driven services, Alphabet is under pressure to deliver results. He noted that a miss in cloud growth, a massive $75 billion capex increase, and lack of clear cost management strategies leave Google struggling to maintain investor confidence.
Despite the market reaction, Alphabet remains focused on scaling AI capabilities and strengthening its cloud division. The company’s investments in data centers and infrastructure reflect its long-term strategy to compete with other tech giants in the AI space. However, with concerns over profitability and return on investment, Alphabet must demonstrate strong execution in the coming quarters to regain investor trust.
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