Alphabet will face investor scrutiny over hefty AI spending following the release of its earnings report. Google’s parent company will release the quarterly earnings report on February 4 and analysts are expecting a slow revenue growth. The slowdown in its advertising and cloud business is credited as a reason behind the slowdown in growth during the holiday quarter.
Alphabet, like other major U.S. tech companies, will face new scrutiny over its capital spending. This comes after the Chinese startup DeepSeek introduced affordable AI models, sparking concerns about a potential price war in the AI industry.
Alphabet’s AI Spending Under Scrutiny
According to the LSEG report, Alphabet’s capital expenditure for last year is estimated to be $50 billion. The company is planning more expenses in 2025 to invest in its cloud expansion and AI-driven search features, including summaries, which are crucial for protecting market share and boosting ad revenue. Last week, Meta and Microsoft defended their hefty AI spending by claiming that it was necessary to stay ahead in the artificial intelligence market.
Meanwhile, Google Cloud growth is expected to slow down in the fourth quarter earnings amid the high expectations for the segment.
Alphabet’s Earnings Estimate
Google’s Search and other business is expected to grow 11.2% in Q4, slightly lower than the 12.2% rise in Q3. Overall, Alphabet’s revenue is projected to increase by 11.9% to $96.6 billion. The cloud business is expected to show strong growth, fueled by rising AI investments. Alphabet’s shares have gained 7% this year, following a 35% rally last year.
However, concerns have grown after Microsoft’s slower-than-expected Azure cloud growth, which shifted focus to AI services. Google Cloud is expected to see a 32% revenue increase in Q4, slightly slower than the 35% growth in Q3. This would outpace Microsoft’s 31% growth and Amazon’s projected 19% increase.
Google Stock Update
Google’s stock demonstrated a mixed performance last week. It began the week with a slight dip, influenced by investor concerns regarding potential regulatory actions and increased competition in the AI sector. However, the stock rebounded mid-week following positive analyst sentiment and anticipation for the upcoming earnings report.
By the end of the week, Google stock closed with a significant gain of 1.2%, settling at $202.76. Today, the stock price is $202.64, showing a slight decrease of 0.06% from Friday’s close. The upcoming earnings report is expected to significantly impact the stock price. Positive results, particularly in advertising revenue and cloud computing growth, could propel the stock upwards, potentially surpassing its 52-week high of $205.48.
