Google’s parent company Alphabet reported its latest earnings for the fourth quarter (Q4) and fiscal year ended 31 December 2024, showing revenue growth but narrowly missing market expectations. Alphabet’s shares declined 9% in extended trading after the announcement, as investors reacted to slowing cloud revenue and rising AI spending. The company posted higher-than-expected earnings per share, while revenue from its core advertising and cloud businesses showed a mixed performance.
Consolidated revenues for Alphabet in Q4 2024 rose 12% year-over-year to $96.5bn, driven by strong momentum across the business. Google Services revenue grew 10% to $84.1bn, reflecting continued strength in Google Search, YouTube ads, and other advertising segments.
Google Cloud revenue surged 30% to $12bn, supported by growth in Google Cloud Platform (GCP), AI infrastructure, and Generative AI solutions. Total operating income increased 31%, while operating margin expanded by 5% to reach 32%. Net income climbed 28%, and earnings per share (EPS) rose 31% to $2.15.
The cloud computing segment, which has been a focal point of Alphabet’s expansion strategy, underperformed compared with analysts’ forecasts. Alphabet also announced plans for a substantial increase in capital expenditures, primarily to expand artificial intelligence infrastructure.
The company reported a 30% year-on-year (YoY) increase in cloud revenue, but this was below market expectations and marked a slowdown from the previous quarter.
CFO Anat Ashkenazi attributed the weaker-than-expected cloud performance to capacity constraints affecting cloud-based AI services. Meanwhile, advertising revenue continued to grow, with YouTube’s ad business reporting double-digit gains. Search advertising also saw a YoY increase.
Alphabet’s AI investment plans
Alphabet outlined plans to spend $75bn in capital expenditures in 2025, significantly exceeding Wall Street estimates. This represents a 29% increase over analyst forecasts and a major jump from the previous year’s spending. Analysts had forecast a more modest investment of around $58bn, which would have represented only a small increase from $52.5bn spent in 2024, according to LSEG data.
The planned investment will largely focus on expanding data centres, servers, and AI computing infrastructure to support Google’s AI models and cloud services. Investors have raised concerns over the scale of Alphabet’s spending, particularly after the emergence of cost-efficient AI models from China’s DeepSeek. Google CEO Sundar Pichai defended the spending increase, stating that Alphabet needs to scale its AI capabilities to remain competitive. He also compared the efficiency of Google’s Gemini AI models to DeepSeek, which reportedly trained with just $5.6m, a fraction of what US firms are spending.
“Our sophisticated, global network of cloud regions and data centres provides a powerful foundation for us and our customers, directly driving revenue,” said Pichai. “We have a unique advantage because we develop every component of our technology stack, including hardware, compilers, models and products. This approach allows us to drive efficiencies at every level, from training and serving, to developer productivity.”
Alphabet continues to face scrutiny from regulators in multiple jurisdictions. In the US, authorities are investigating its advertising and search businesses, while Chinese regulators have launched an antitrust probe into the company following the introduction of new US tariffs.
In a separate case, US prosecutors have expanded charges against a former Google software engineer accused of stealing AI trade secrets for two Chinese companies. The indictment includes allegations of economic espionage and trade secret theft, with potential penalties of up to 15 years in prison and multi-million dollar fines.
Read more: UK CMA launches probe into Google’s search and advertising dominance
