Alphabet Q4 Earnings Highlights: AI, Cloud, YouTube Momentum Continues, $75 Billion CapEx Guidance Spooks Investors

Alphabet Inc. (GOOGL), the parent company of Google, reported its fourth-quarter earnings on Tuesday, February 5, 2025, highlighting continued momentum in AI, cloud services, and YouTube. However, the company's guidance for capital expenditures (CapEx) of $75 billion in 2025 spooked investors, leading to a 6.9% drop in the stock price in after-hours trading.



AI and Cloud Momentum
Alphabet's AI and cloud services continued to drive growth in the fourth quarter. The company's cloud revenue grew by 30% year-over-year, although this was down from the 35% rate seen in the third quarter. Alphabet's cloud revenue for the quarter was $11.96 billion, slightly below the FactSet consensus of $12.19 billion. Despite the slight miss, Alphabet's cloud business remains a significant growth driver for the company.

YouTube also continued its strong performance, with ad revenue up 14% year-over-year to $10.5 billion. This growth was driven by increased user engagement and the platform's ability to attract and retain top content creators. Alphabet's total advertising revenue for the quarter was $72.5 billion, up 10.6% year-over-year and slightly above Wall Street's estimates.



Profit and Revenue Growth
Alphabet reported Q4 profit and revenue growth, but the revenue missed expectations for the first time in two years. Earnings per share (EPS) rose to $2.15 from $1.64 a year ago, above the FactSet consensus of $2.13. Revenue grew 11.8% to $96.47 billion, but this was below the FactSet consensus of $96.68 billion.

CapEx Guidance Spooks Investors
Alphabet's guidance for capital expenditures (CapEx) of $75 billion in 2025 spooked investors, as this high level of investment could impact the company's profitability in the short term. The increased CapEx is likely due to Alphabet's continued investment in AI and cloud services, as well as its expansion into new areas such as nuclear power for AI's future load.

Looking Ahead
Alphabet's continued investment in AI and cloud services has positioned it as a leader in these areas, driving user engagement and customer demand. However, the company faces potential long-term risks and challenges, such as high costs and competition, regulatory challenges, and technological obsolescence. By effectively managing these risks and maintaining its innovation and leadership, Alphabet can continue to reap the benefits of its strategic focus on AI and cloud services.

In conclusion, Alphabet's Q4 earnings report highlighted continued momentum in AI, cloud services, and YouTube, but the company's guidance for capital expenditures of $75 billion in 2025 spooked investors. As Alphabet continues to invest in AI and cloud services, it must effectively manage the potential long-term risks and challenges to maintain its competitive position in the tech industry.