Alphabet has reported fourth quarter earnings that missed analysts’ estimates in revenue as growth in Google Cloud slowed.
Google’s parent, Alphabet, missed market expectations in a key metric – Google Cloud growth – during the fourth quarter, resulting in a more than 7% drop in its share price in the extended trading hours. The company also provided guidance indicating a heavy capital expenditure of approximately $75 billion (€72.73 billion) in capital expenditures in 2025, well exceeding analysts’ estimates.
The selloff in Alphabet’s shares suggests that investors are concerned its mounting spending on data centre is not yielding expected results. Markets had high expectations for growth in tech giants, especially following the launch of a much cheaper Chinese AI model from DeepSeek.
Despite a slowdown in Google Cloud, Alphabet’s core business – Google search and YouTube advertising – continued to show robust growth. CEO Sundar Pichai is optimistic about the company’s prospect and commented: “Q4 was a strong quarter driven by our leadership in AI and momentum across the business … We are confident about the opportunities ahead, and to accelerate our progress.”
Google Cloud decelerates growth
Google Cloud generated revenue of $11.96 bn (€11.60bn) in the fourth quarter, compared with Wall Street’s estimated $12.19 bn (€11.82bn). The division made an annual growth of 30%, and a sequential increase of 5.4%, slowing from 35% and 9.6%, respectively, in the previous quarter. In comparison, Microsoft reported a 31% annual growth in its cloud business last week. Google Cloud’s market share continues to be behind that of the Amazon Web Services (AWS) and Microsoft’s Azure.
Overall revenue came in at $96.47 bn (€93.58bn), increasing 12% from the same quarter last year, but missing the estimated $96.56 bn (€93.64bn). In the third quarter, Alphabet reported a 15% growth in revenue. Its core business, Google services, which includes Google Search & other and YouTube ads rose 10% year-on-year to $84.09bn (€81.56bn).
“Our AI-powered Google Cloud portfolio is seeing stronger customer demand, and YouTube continues to be the leader in streaming watchtime and podcasts. Together, Cloud and YouTube exited 2024 at an annual revenue run rate of $110 billion,” said Pichai.
Dividend payments to stockholders will be totalling $2.4 bn (€2.33bn) for the three months ended 31 December of 2024.
Waymo’s robotaxi ambitions
Alphabet’s segment, Other Bets, which includes the life sciences unit Verily and the autonomous services Waymo, generated revenue of $400m (€388m) in the fourth quarter, down 39% from the same quarter of 2023, and well below Wall Street’s estimates.
The segment reported an operating loss of $1.17 bn (€1.13bn) during the quarter, widening from $863m (€837m) in the previous quarter.
Waymo is one of the first robotaxi services in the US, already operating on public roads in Los Angeles, Sanfrancisco and Phoenix. It is ahead of Tesla’s Cybercab release and is expected to become a key player in the industry. In December, the company announced it will start testing its self-driving cars in Tokyo in early 2025, which would be the first international expansion.
Recently, the self-driving unit announced plans to expand testing its services in 10 new cities including San Diego and Las Vegas, in 2025.