Alphabet Revenue Disappoints on Weak Cloud Sales
Alphabet, Google’s parent company, reported sales that narrowly fell short of Wall Street’s expectations, weighed down by disappointing growth in the company’s cloud-computing division, which sells the company’s artificial intelligence tools to other businesses.
The Silicon Valley giant reported revenue of $95.5 billion in its most recent quarter, an increase of 12 percent from a year earlier, but short of the $96.6 billion that Wall Street analysts had expected. Profit was $26.5 billion, a 28 percent increase that narrowly beat analysts’ estimate of $26 billion.
Google’s cloud division has become an essential component of the company’s move to generative artificial intelligence, the technology that has created a spending boom in Silicon Valley and beyond. Google Cloud’s sales were $11.95 billion in the fourth quarter, an increase of 30 percent from a year earlier, but short of the $12.2 billion that analysts had expected.
The results raise questions about whether A.I. will prove an advantage for Google Cloud, which remains smaller than competing services from Amazon and Microsoft. Alphabet has invested an enormous amount to try to bolster its A.I. offerings, amid investor concerns that American companies may be spending too much on A.I. relative to their Chinese counterparts.
The internet giant announced it would spend $75 billion in capital expenditures in 2025, an acceleration from last year.
Alphabet’s stock tumbled 6 percent in aftermarket trading.
The Chinese A.I. start-up DeepSeek caused American markets to quake last week after its chatbot app soared in popularity. DeepSeek has said it trained its system for just $6 million, a fraction of what tech giants like Google spend. Alphabet’s stock took a hit, among many others, though it has recovered. Tech industry insiders have since questioned some of DeepSeek’s claims.
Still, the episode highlighted Alphabet’s crucial need to get A.I. right, in order to keep its digital services relevant to consumers and businesses that have never been more spoiled for choices.
Google’s search engine, seen as vulnerable to shifting A.I. trends since OpenAI’s ChatGPT took the world by storm in 2022, is so far holding strong. It remains the world’s most popular search product and in the fourth quarter, generated $54 billion in revenue. Analysts had expected $53.4 billion.
As Alphabet continues to invest in A.I., it has also continued efforts to cut other costs, including through work force reductions. Last week, the company said it offered voluntary buyouts to employees in its Platforms and Devices department, which is responsible for its Chrome web browser and Pixel smartphones. The company also cut almost two dozen roles at YouTube this week, according to an email viewed by The New York Times.
Advertising sales at YouTube climbed 14 percent to $10.5 billion, above the $10.2 billion expected by analysts.
