What trends in GOOGL's earnings surprises suggest for 2025?

Google's (GOOGL) earnings report for Q4 2024 reflects a company that continues to grow, albeit at a pace that may raise some concerns. The following trends in Google's earnings surprises suggest a cautious outlook for 2025:

1. Growth Continues, but Misses Expectations: Google's fourth-quarter revenue amounted to approximately $96.469 billion, marking an 11.8% year-over-year increase. While this is a positive sign, it fell slightly short of analysts' expectations of $96.62 billion. This minor miss could indicate that while Google is growing, the pace of growth may not be as strong as anticipated.
2. Cloud Sales and Spending: The earnings report revealed that Google's cloud business experienced weaker-than-expected sales. Additionally, the company predicted higher spending in 2025 than experienced, which could suggest that investors are anticipating even greater investment in growth areas like cloud and AI. This could impact short-term profitability but is crucial for long-term competitiveness.
3. Analyst Opinions: Despite the minor revenue miss, some analysts remain optimistic. Piper Sandler, for instance, sees the post-earnings weakness as a buying opportunity, indicating confidence in Google's long-term prospects. However, the stock's decline, with a 7.22% drop in pre-market trading, reflects investor concerns.
4. Price Target Adjustments: Needham recently increased Google's price target to $225, citing strong performance in the cloud and ad revenue. This suggests that while short-term expectations may have been tempered, long-term potential remains positive.

In conclusion, Google's earnings trends for 2025 suggest a company that is growing, but at a pace that may not meet all market expectations. The company's emphasis on investing in growth areas like cloud and AI is likely to impact short-term profitability, but it is crucial for maintaining long-term competitiveness. Investors should monitor Google's performance closely, considering both the potential for growth and the risks associated with higher spending.