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Alphabet Slides After Cloud Sales Fall Short Of Expectations

Feb 05, 2025 - ndtvprofit.com
Alphabet Inc., Google's parent company, announced a significant increase in its 2025 capital expenditures to $75 billion, surpassing analysts' expectations of $57.9 billion. This investment is aimed at driving revenue by enhancing customer services, particularly in the cloud sector. However, Alphabet's fourth-quarter revenue fell short of expectations, with sales excluding partner payouts at $81.6 billion compared to the projected $82.8 billion. The company's cloud business, a key indicator of its AI-driven growth, reported $12 billion in sales, missing estimates and trailing behind competitors like Amazon and Microsoft. This has raised investor concerns about Alphabet's heavy spending on AI and its ability to maintain momentum amidst intensifying competition.

Despite these challenges, Alphabet's search advertising and YouTube revenues exceeded expectations, with search ads generating $54 billion and YouTube bringing in $10.5 billion. However, its Other Bets segment, including Waymo and Verily, underperformed with $400 million in revenue against a $592 million estimate. Waymo is expanding its operations, planning tests in new cities and an international debut in Tokyo. The company's AI investments have also benefited chip suppliers like Broadcom, whose shares rose following Alphabet's announcement. Overall, Alphabet faces pressure to demonstrate tangible business gains from its AI investments while navigating antitrust challenges and competitive threats.

Key takeaways:

  • Alphabet announced $75 billion in 2025 capital expenditures, significantly exceeding analysts' expectations of $57.9 billion.
  • Google's cloud business growth slowed, missing sales estimates and causing concern among investors about the company's AI investments.
  • Search advertising generated $54 billion in sales, slightly surpassing analysts' estimates, while YouTube reported $10.5 billion in revenue, exceeding expectations.
  • Alphabet's Other Bets, including Waymo and Verily, generated $400 million in revenue, falling short of the $592 million estimate.
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