Shares of Google’s parent company Alphabet fell more than 6% after the company reported a slight miss in expected revenue on Tuesday. The company reported $96.5bn, compared with analyst expectations of $96.67 bn. The company surpassed investors’ expectations of $2.13 in earnings per share, however, with $2.15 in EPS.
“Q4 was a strong quarter driven by our leadership in AI and momentum across the business,” Alphabet chief executive Sundar Pichai wrote in a statement. “We are building, testing, and launching products and models faster than ever, and making significant progress in compute and driving efficiencies.”
The company reported $84bn in its services revenue, which includes Google search and YouTube ads and $12bn in Cloud revenues, a 30% increase year over year.
As competition heats up in various sectors of Alphabet’s business, analysts will be looking for more details about a wide range of topics including the company’s AI spending, its Cloud revenue, and its ability to continue to bolster its search advantage against new and existing generative AI players such as China’s DeepSeek and OpenAI.
The company’s revenue slowdown reflects the “challenging year” Google has had and 2025 might be the year that it loses its competitive edge, according to Emarketer senior analyst Evelyn Mitchell-Wolf.
“Although it’s still well insulated, Google’s advantages in search hinge on its ubiquity and entrenched consumer behavior,” Mitchell-Wolf said in a statement. This year “could be the year those advantages meaningfully erode as antitrust enforcement and open source AI models change the game. And Cloud’s disappointing results suggest that AI-powered momentum might be beginning to wane just as Google’s closed model strategy is called into question by DeepSeek.”
Alphabet also said it plans to spend $75bn on capital expenditures in the next year, largely to build out its artificial intelligence capabilities and infrastructure.
“Our results show the power of our differentiated full-stack approach to AI innovation and the continued strength of our core businesses,” Pichai wrote. “We are confident about the opportunities ahead, and to accelerate our progress, we expect to invest approximately $75 billion in capital expenditures in 2025.”
Spending on building out AI infrastructure and development has continued to rise across the industry, and Alphabet is expected to be no exception. Meta said it planned to spend $65bn on AI infrastructure just in 2025. That’s partly why news of Deepseek’s AI model, which the company said they trained with just $5.6m, sparked investor panic in the US and erased $1tn from the stock market. But research firm SemiAnalysis now estimates that DeepSeek actually spent a total of almost $1.3bn. Analysts will be looking to hear how this has impacted the way Alphabet look at its own spending and monetizing its AI search features.
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“It will be interesting how the rising costs of AI impact Alphabet’s roadmap for AI-integrated advertising, especially in light of DeepSeek’s revelation that they may have wasted tremendous money and energy,” said Nikhil Lai, senior analyst at Forrester.
The company appears to also be opening the door to develop AI for more use cases, including for national security. Moments before the company reported its earnings, the company also removed its pledge not to use its AI technology for weapons, surveillance and technology that can “cause or are likely to cause overall harm”. In a blog post, Google’s head of AI, Demis Hassabis, and the company’s senior vice-president for technology and society, James Manyika, wrote that as global competition for AI leadership increases, the company believes “democracies should lead in AI development” which are guided by “freedom, equality, and respect for human rights”.
“And we believe that companies, governments, and organizations sharing these values should work together to create AI that protects people, promotes global growth, and supports national security.”
Analysts will also likely have questions about the Department of Justice case against the search giant, in which the tech giant suffered landmark loss. A judge found the company maintained a monopoly in general search and text advertising services. The justice department has suggested breaking up the company as a means to remedy this.
China has also set its sights on Google. After the Trump administration announced it was imposing tariffs on China, China responded by announcing a range of measures including a new inquiry into whether Google violated the country’s anti-monopoly law.
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