Despite a strong revenue growth in Q4 2024, Alphabet's cloud business clouded the mood

On the surface, Alphabet’s fourth-quarter report had all the makings of a success story—double-digit revenue growth and soaring profits. But a revenue miss and concerns over cloud revenue shortfalls and hefty AI spending left investors in a sour mood.

The Google-parent company posted a 12% revenue increase to $96.47 billion. Earnings per share surged 31% to $2.15, and net income hit $26.5 billion. Yet investors were left wanting more.

Wall Street had anticipated just a touch higher—$96.56 billion in revenue—and that slight miss sent Alphabet’s stock tumbling more than 7% in after-hours trading. The company’s total revenue for the fiscal year reached $350 billion, up 14% from the previous year.

Advertising, Alphabet’s biggest cash cow, held steady with $72.46 billion in revenue, up 11% from the previous year. Search remained a powerhouse, bringing in $54.03 billion, while YouTube ads generated $10.47 billion, beating expectations. Yet it was the cloud business that clouded the mood.

Google Cloud revenue climbed 30% year-over-year to $11.96 billion but missed Wall Street’s $12.19 billion target. While still a growth driver, the unit faces stiff competition from Amazon Web Services and Microsoft Azure, both seen as leaders in the race for enterprise cloud dominance.

Beyond its core businesses, Alphabet’s "Other Bets" segment, which includes ventures like Waymo and Verily, posted just $400 million in revenue—a steep 39% decline from the previous year and well below analyst forecasts.

CHART: Alphabet posts a strong quarterly performance, but its ad revenue fell short

Alphabet Inc., Google’s parent company has disclosed its financial results for the fourth quarter of 2023, providing insights into its performance and outlining key figures that shaped investor sentiment during the quarter.

TechloyEmmanuel Oyedeji

Meanwhile, the company ramped up investments in AI research, infrastructure, and product development amidst an increasingly competitive tech landscape. This sent Alphabet's capital expenditures up reaching $14 billion in Q4, exceeding expectations. Pichai even confirmed the company plans to spend $75 billion in 2025 to fuel AI innovations and expand its cloud capabilities.

Sundar Pichai, Alphabet's CEO, is really excited about how the company's AI investments are already making Google Search and YouTube better. Even though things are looking good, investors on Wall Street are still a little hesitant. They want to see real profits now, not just promises of what might happen down the road.

Looking ahead to the first quarter of 2025, Alphabet's plan is to keep a steady hand on its main businesses while also pushing forward with AI and cloud computing. It predicts revenue growth somewhere between 10% and 12%, but investors are going to be watching closely.