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Alphabet Stock Drops 7% as Q4 Revenue Misses Estimates Amid AI Investments

Alphabet Stock Drops 7% as Q4 Revenue Misses Estimates Amid AI Investments. Source: The Pancake of Heaven!, CC BY-SA 4.0, via Wikimedia Commons

Alphabet Inc. (NASDAQ: GOOGL) saw its stock tumble over 7% in after-hours trading after reporting fourth-quarter revenue that missed Wall Street estimates. The tech giant’s cloud business underperformed, despite strong growth in advertising and YouTube revenue, as it ramps up investments in artificial intelligence to stay competitive.

For the quarter ending Dec. 31, Alphabet posted earnings of $2.15 per share on $96.47 billion in revenue, slightly below analyst expectations of $2.12 per share on $96.69 billion in revenue.

Advertising remained a bright spot, generating $72.46 billion, up from $65.52 billion a year ago, and surpassing projections of $71.73 billion. YouTube ad revenue also climbed to $10.47 billion, exceeding the forecasted $10.22 billion.

Google Cloud, however, failed to meet expectations, reporting $11.96 billion in revenue compared to the anticipated $12.19 billion. While cloud revenue grew from $9.19 billion a year earlier, it fell short amid rising competition in AI-driven cloud services.

Alphabet announced plans to invest approximately $75 billion in capital expenditures in 2025 as it prioritizes AI innovation. This significant spending underscores the company’s push to enhance infrastructure and remain a dominant force in the tech landscape.

Despite robust ad revenue, investors reacted negatively to the cloud unit’s underperformance, leading to the sharp stock decline. With AI investment intensifying across the industry, Alphabet faces pressure to deliver stronger cloud growth while maintaining leadership in digital advertising.

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