Alphabet Inc. (NASDAQ: GOOG) has released its fourth-quarter 2024 results, prompting mixed reactions from investors. Although consolidated revenue rose 12% year-over-year to $96.5 billion, high capital expenditures and slowing cloud business growth raised concerns. Although the company's share price fell by more than 9% following this information, in the long run, this is a reasonable correction of the bullish trend that persists.*
Financial results
Alphabet recorded strong revenue growth across most of the segments in which it conducts its business, which points to a stable position in the market. The company also exceeded analysts' expectations for earnings per share, namely $2.15 versus a forecast of $2.13. But investors were most concerned about the record planned capital expenditure for 2025 of $75 billion, which is significantly more than the estimated $57.9 billion.
Alphabet Inc. share price performance over the past five years *
Google Cloud: Falling behind the competition
Google Cloud recorded revenue of $19.96 billion, which is a higher amount compared to last year, but it represents a decline within expectations. Despite investment and growing demand, it lags behind Amazon Web Services (AWS) and Microsoft Azure. Sundar Pichai, CEO of Alphabet, emphasized that in order for the company to maintain its place and potentially catch up with the aforementioned competitors, it will be necessary to continue investing.
AI investments and growing competition
Investors' concerns are also directed towards spending on artificial intelligence. Although Google is investing in AI technologies, the Chinese company DeepSeek recently introduced a cheaper AI solution, which increases the pressure on the competitiveness of Alphabet and other American tech giants in this segment.
Strong advertising and growing regulatory barriers
Google's advertising revenues remained traditionally strong. Search revenue came in at $54 billion, slightly above expectations, with YouTube alone earning $10.5 billion, also beating expectations. The podcast segment had an increased share of sales, mainly thanks to political advertising in the US.
However, Alphabet faces legal challenges related to its monopoly position in search and advertising. Key lawsuits are expected in 2025, which could potentially weaken the company's performance to some extent later on.
Waymo and the future of autonomous vehicles
Alphabet's spin-off projects generated a total of $400 million in revenue, which is less than the expected $592 million. Currently, one of the most important projects, Waymo, a division of autonomous vehicles, is expanding its scope and plans to test outside the United States, specifically in Tokyo. Pichai also highlighted the average number of rides, which is at the level of 150,000. At the same time, he announced that a new version of this technology is being worked on, which is supposed to reduce hardware costs.
Conclusion and investment perspective
The high valuations of American technology companies currently mean that companies have only minimal room for error. Alphabet's failure to meet expectations in the cloud business has contributed to a negative market reaction, but the situation must be seen in a broader context. Alphabet shares have only recently surpassed their all-time high, and therefore the current correction is in line with the normal market cycle, with no clear signs of a weakening of the bullish trend.
When evaluating Alphabet's performance, it is important to highlight the continued year-on-year growth in both sales and profits. Despite the challenges in the cloud services segment, the company maintains a strong position in the advertising business, and its investments in artificial intelligence and innovation can bring positive results in the long term. For investors, Alphabet remains an attractive but dynamic choice, and future developments will depend on the company's ability to effectively manage its costs and remain competitive in key areas.
* Past performance is not a guarantee of future results
Resources:
https://abc.xyz/assets/a3/91/6d1950c148fa84c7d699abe05284/2024q4-alphabet-earnings-release.pdf
https://www.cnbc.com/2025/02/04/alphabet-q4-earnings-report-2024.html
