Alphabet’s Q4 results were far from inspiring, with the company’s revenue missing estimates and its key growth segment, Google Cloud, underperforming market expectations. While Google’s search business continues to generate stable revenue through its advertising efforts, growth in this area is expected to remain in the single digits for 2025.
“Google Cloud was positioned as Alphabet’s next big driver of growth, but the miss on cloud revenue has left Wall Street concerned about the company’s AI investments. Investors had hoped these expenditures would result in better-than-expected performance. The fact that Alphabet has also forecasted capital expenditures around USD$75 billion for 2025, significantly above analyst expectations, adds another layer of uncertainty.” Josh Gilbert, market analyst at eToro, commented.
Google Cloud’s operating income saw an impressive increase of over 250% in 2024, but the failure to exceed revenue expectations in this segment has kept investors cautious. The market’s attention will focus on the cloud miss, as well as Alphabet’s announcement of higher-than-expected capex for the upcoming year.
Nevertheless, Alphabet still posted bright spots in its Q4 earnings report, with search, advertising, and YouTube revenues surpassing expectations. “It’s a mixed bag,” added Gilbert. “While there are positives in the company’s traditional revenue streams, the substantial spending on AI needs to justify itself in the upcoming quarters. If that doesn’t happen, Alphabet may face mounting pressure on its shares.”
In summary, Alphabet delivered a decent performance, but the results were far from extraordinary. Investors will be closely monitoring the company’s ability to turn its heavy spending into tangible growth, especially in its AI and cloud businesses, as we move further into 2025.
