Alphabet Inc., the parent company of Google, experienced a significant decline in its share price, dropping 7.5% after reporting fourth-quarter revenues of $96.47 billion, which fell short of market expectations. A key factor in this downturn was the performance of Google’s cloud computing division, which saw a 30% increase in revenue to $12 billion. This growth was below analyst projections of a 33% rise to $12.19 billion and marked a decrease from the 35% growth observed in the previous quarter.
In response to these challenges, Alphabet announced plans to significantly boost its capital expenditures on artificial intelligence, aiming to invest $75 billion in 2025, up from $52.5 billion in 2024. This move underscores the company’s commitment to enhancing its AI capabilities to remain competitive against rivals like Microsoft and Meta, who are also heavily investing in AI infrastructure.
Despite these strategic investments, investors have expressed concerns about Alphabet’s ability to effectively monetize its AI initiatives and the potential for supply constraints in the cloud sector. The recent financial results have intensified scrutiny over Alphabet’s AI strategy and its capacity to generate substantial returns from these investments.