Wednesday, February 12, 2025
HomeMarketAlphabet faces scrutiny on AI spending as Google cloud growth slows

Alphabet faces scrutiny on AI spending as Google cloud growth slows

-


By Deborah Mary Sophia and Zaheer Kachwala

(Reuters) – Alphabet will face investor scrutiny over its massive spending on AI when it reports earnings on Tuesday, as revenue growth at the Google parent likely slowed in the holiday quarter due to a slowdown in its advertising and cloud businesses.

Like other U.S. technology heavyweights, Alphabet faces new scrutiny on its capital expenditure after Chinese startup DeepSeek last month launched low-cost AI models that threaten to push the AI industry into a price war.

Alphabet’s capital expenditure is estimated to have been $50 billion for last year, according to LSEG, with more planned for 2025 to support its cloud expansion and AI-driven search features, including summaries, which are vital to defending its market share and attracting more ad revenue.

Microsoft and Meta Platforms executives defended their hefty AI spending plans last week, saying they were crucial to staying ahead in the new field.

Meanwhile, Google Cloud growth is expected to decelerate in the fourth quarter amid high expectations for the segment.

“Although (the cloud unit’s) rate of growth is expected to slow, elevated investment is expected to continue, but efficiency gains have so far kept profits buoyant. Sustaining this balancing act will be a critical and investors will want to see evidence of this,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

Revenue from Google’s Search and Other business is expected to have risen 11.2% in the fourth quarter, according to Visible Alpha estimates, compared with a 12.2% rise in the third quarter.

Overall, Alphabet’s revenue is expected to grow 11.9% to $96.6 billion, slower than the third quarter, according to estimates compiled by LSEG.

The company – whose Search and YouTube services are used by more than 2 billion people each month – is also trying to retain its dominant share in the search advertising market amid rising competition from e-commerce firm Amazon.com and social media apps such as TikTok.

Higher political ad spending around the U.S. Presidential elections may have aided Google in the fourth quarter, after Facebook-owner Meta also reported a similar ad revenue boost.

Still, Meta’s subdued first-quarter forecast has sparked concerns over the ad market outlook as economic uncertainty increases with the looming threat of global tariffs.

CLOUD FOCUS

Expectations are high for Google’s cloud business after the segment notched its fastest growth in two years in the September quarter thanks to rising AI spending by businesses.



Source link

LATEST POSTS

4 stocks closed above VWAP on February 11 – Bullish Trend

On February 11, the closing prices of four stocks from the Nifty500 pack rallied by over 3% relative to the VWAP (Volume Weighted Average...

Top stocks to buy today: Stock recommendations for February 12, 2025

Top stocks to buy today (AI image) Stock market recommendations: According to Mehul Kothari, DVP - Technical Research, Anand Rathi Shares and Stock...

Anthropic CEO Dario Amodei warns: AI will match ‘country of geniuses’ by 2026

Join our daily and weekly newsletters for the latest updates and exclusive content on industry-leading AI coverage. Learn More Artificial intelligence will match the collective...

3 new reasons to be concerned about Magnificent 7 stocks

With the often-hot Magnificent Seven trade on the skids less than two months into the year, investors may need to...

Most Popular

spot_img