Revenue misses expectations while Alphabet ramps up US$75 billion in capital expenditures for AI expansion
Alphabet shares fell 7.2 percent on Wednesday after reporting fourth-quarter revenue below Wall Street forecasts and revealing substantial spending plans for artificial intelligence (AI) expansion, according to CNBC.
This decline marked the stock’s worst performance since January 2024.
The company exceeded earnings expectations by 2 cents per share. However, revenue reached US$96.47bn, slightly below the US$96.56bn estimate from LSEG.
While Alphabet’s revenue increased 12 percent year over year, growth in its YouTube advertising, search, and services segments slowed.
Alphabet announced plans to allocate US$75bn toward capital expenditures as it expands its AI capabilities and builds out data centres and infrastructure to compete with other major tech firms.
The planned investment significantly exceeded Wall Street’s projected US$58.84bn, according to FactSet.
Finance chief Anat Ashkenazi explained that the increased spending aims to “support the growth of our business across Google Services, Google Cloud and Google DeepMind.”
She added that the funds will be directed toward “technical infrastructure, primarily for servers, followed by data centers and networking.”
The company anticipates capital expenditures will range between US$16bn and US$18bn, surpassing FactSet’s US$14.3bn estimate.
JPMorgan analyst Doug Anmuth identified high costs, capital expenditures, and cloud revenue as key reasons for the stock’s decline.
Bernstein’s Mark Shmulik noted that this is the third consecutive quarter in which Google’s cloud performance has affected the company’s stock movement.
“If digital ad growth is akin to a long drive competition, then Google would be sitting comfortably here with strong Search and YouTube bombs down the fairway,” Shmulik said.
“But as the game shifts to the AI putting green, there’s little room for error with a slight cloud miss, a whopping CAPEX guide up to US$75bn for 2025, and lack of actionable operating leverage commentary leaves Google 3-putting for bogey,” he added.
