Alphabet Inc., the parent company of Google, reported its fourth-quarter earnings for 2024, revealing a slowdown in revenue growth and highlighting the intensifying competition in the artificial intelligence (AI) sector.
For the quarter ending December 31, 2024, Alphabet reported revenues of $96.5 billion, a 12% increase from the same period the previous year. This marks the company’s lowest growth rate since 2023.
The Google Cloud division generated $12 billion in sales, reflecting a 30.1% year-over-year growth. However, this growth rate has decelerated from the prior quarter’s 35%. Despite this, Alphabet plans to increase capital expenditures to $75 billion in 2025 to expand its AI and cloud capabilities.
Alphabet’s capital expenditure for the quarter amounted to $14 billion, exceeding the $13.26 billion that Wall Street had anticipated, according to StreetAccount. Chief Financial Officer Anat Ashkenazi explained during an earnings call with investors that the figure mainly reflects the company’s investment in its technical infrastructure. The largest portion of this was spent on servers, followed by data centers “to support the growth of our business across Google Services, Google Cloud, and Google DeepMind,” as reported by CNBC.
The company’s core advertising revenue rose by 10.6% to $72.5 billion. However, Alphabet faces challenges, including increased competition from Amazon and TikTok, as well as an ongoing antitrust investigation in China, and potential legal actions in the U.S. Despite these issues, Google CEO Sundar Pichai indicated that the company is focused on growing its Gemini AI chatbot user base and exploring ad integration within Gemini.
“Q4 was a strong quarter driven by our leadership in AI and momentum across the business,” wrote Pichai in a statement reported by The Guardian, “We are building, testing, and launching products and models faster than ever, and making significant progress in computing and driving efficiencies.”
“The company is in a great rhythm and cadence, building, testing, and launching products faster than ever before,” Pichai added, as noted by The Associated Press.
In response to the earnings report, Alphabet’s stock experienced a decline of more than 8%. The stock closed at $207.71, down 2.51% from the previous close. The intraday high was $210.94, and the intraday low was $189.02.
“The reaction highlights concerns that competitors like Microsoft, with its OpenAI partnership, are in a better position to turn AI hype into revenue,” said Investing.com analyst Jesse Cohen, as reported by The Associated Press.
Despite the challenges, Alphabet remains committed to its AI and cloud initiatives. The company plans to invest $75 billion in 2025 to enhance its AI and cloud capabilities, aiming to strengthen its position in the competitive tech industry.
Investors and industry analysts will continue to monitor Alphabet’s performance and strategic initiatives, particularly in the AI sector, to assess the company’s ability to navigate the evolving technological landscape and maintain its market leadership.