Google parent company Alphabet reported mixed fourth-quarter results, with revenue slightly missing Wall Street expectations amid growing competition in the artificial intelligence space. The tech giant's shares dropped over 6% following the announcement.
Alphabet posted revenue of $96.5 billion, falling short of analyst expectations of $96.67 billion. However, the company exceeded earnings forecasts with $2.15 earnings per share, compared to the expected $2.13.
Key performance highlights include:
- Google Services revenue: $84 billion
- Google Cloud revenue: $12 billion (up 30% year-over-year)
- YouTube advertising revenue: $10.5 billion (up 14% year-over-year)
- Operating margin: 32% (increased 5 percentage points year-over-year)
AI Investment and Competition
The company announced plans to invest $75 billion in capital expenditures for 2025, primarily focused on building AI capabilities and infrastructure. This announcement comes as competition in the AI space intensifies, particularly from emerging players like DeepSeek and established competitors like OpenAI. The company faces potential erosion of its search advantages due to:
- Antitrust enforcement pressures
- Rising competition from open-source AI models
- Questions about its closed model strategy
- Cloud performance concerns
In a notable policy change, Alphabet removed its pledge restricting AI use in weapons and surveillance technology. The company's leadership, including AI head Demis Hassabis and SVP James Manyika, emphasized the importance of democratic nations leading AI development.
Legal Challenges
The company continues to face significant legal challenges, including:
- A landmark loss in the Department of Justice monopoly case
- New antitrust inquiry from China following US-China trade tensions
- Potential company breakup discussions as a remedy for monopolistic practices
CEO Sundar Pichai emphasized the company's AI progress, stating they are "building, testing, and launching products and models faster than ever" while focusing on compute efficiency improvements.
