Alphabet's US$75 billion AI plan surprises Wall Street as revenue growth slows in key segments
Alphabet shares dropped 7.2 percent on Wednesday after the company missed fourth-quarter revenue expectations and outlined plans for significant AI-related spending, according to CNBC.
The stock registered its worst session since January 2024.
Alphabet’s earnings surpassed estimates by 2 cents per share, but revenue reached US$96.47bn, falling short of US$96.56bn, the figure projected by LSEG.
Although the company reported 12 percent revenue growth year over year, its YouTube advertising, search, and services segments slowed.
The company announced plans to allocate US$75bn toward capital expenditures, significantly exceeding Wall Street’s US$58.84bn estimate from FactSet.
The spending aims to enhance Alphabet’s AI capabilities as it competes with other major US technology firms in expanding data centres and infrastructure.
Finance chief Anat Ashkenazi explained that increased capital expenditures would “support the growth of our business across Google Services, Google Cloud and Google DeepMind.”
She added that the investment would be directed toward “technical infrastructure, primarily for servers, followed by data centers and networking.”
Alphabet expects capital expenditures to range between US$16bn and US$18bn, surpassing the US$14.3bn projected by FactSet.
JPMorgan analyst Doug Anmuth pointed to costs, capital expenditures, and cloud revenue as the key factors behind Alphabet’s post-earnings stock decline.
Bernstein’s Mark Shmulik noted that this marks the third consecutive quarter where Alphabet’s stock movement has been tied to Google Cloud’s performance.
Shmulik compared Alphabet’s digital ad business to a long-drive golf competition, stating that the company has remained strong in Search and YouTube advertising.
However, he described AI expansion as a different challenge, saying, “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.”
