Alphabet’s Stock Drops After Google Cloud Miss; Investors Wary of $75B Data Center Spending

Key Takeaways

• Alphabet reported $81.6B in Q4 revenue, below analysts’ $82.8B estimate.
• Google’s parent company announced $75B in 2025 capex, far above the expected $57.9B.
• Analysts warn Alphabet faces tougher competition from AI-powered search tools like ChatGPT and Microsoft Copilot.

Alphabet’s fourth-quarter revenue fell short of expectations, sending shares down 9% on Wall Street. Investors are wary of the company’s $75 billion AI-driven capital spending, well above the $57.9 billion expected.

Analysts warn that AI rivals like ChatGPT and Microsoft Copilot threaten Google‘s dominance amid rising regulatory and competitive pressures.

Disappointing Results Hit Alphabet Stock

Alphabet reported fourth-quarter revenue of $81.6 billion, falling short of analysts’ $82.8 billion estimate, causing shares to drop over 9% after hours. Net income was $2.15 per share, slightly above Wall Street’s $2.13 estimate.

Search advertising brought in $54 billion, slightly beating expectations. YouTube recorded $10.5 billion in revenue, surpassing the $10.2 billion forecast, driven by increased ad spending on podcasts during the U.S. election.

Meanwhile, Alphabet’s Other Bets unit, including Waymo and Verily, generated $400 million, missing the $592 million estimate.

Waymo now averages 150,000 weekly trips and plans to expand internationally with a test in Tokyo. CEO Sundar Pichai noted ongoing work on a new version of its self-driving technology to reduce hardware costs.

Huge Data Center Investment

However, investor concerns remain over Alphabet’s heavy AI infrastructure spending, which helped boost Broadcom shares by 6% in after-hours trading.

Alphabet revealed plans for $75 billion in capital expenditures for 2025, significantly surpassing analysts’ $57.9 billion estimate. On the earnings call, Pichai emphasized that this investment is “directly driving revenue” by supporting customers.

“The cost of actually using AI is going to keep coming down. This will make more extraordinary use cases feasible,” Pichai said , responding to accusations of spending profligately.

“That’s the opportunity space. It’s as big as it comes and that’s why you’re seeing us invest to meet that moment,” he added.

AI Evolution Puts Google at Risk

“A raft of negative factors suggest that life is getting much harder for Alphabet. It is caught up in a whirlwind of competitive pressures, regulatory clampdowns and political interference,” Dan Coatsworth, investment analyst at AJ Bell, told CCN.

“Alphabet is being punished for missing quarterly revenue expectations for the first time since February 2023 and for heavily spending on AI-related projects,” Coatsworth said.

“Investors expect flawless execution from the tech giant, yet weaker-than-expected growth in cloud computing implies the AI craze isn’t automatically turning into big bucks for infrastructure providers,” he added.

According to Coatsworth, the $75 billion guidance for capital expenditure was equally worrying.

“Previously, large capex would have been taken as a positive sign that Alphabet was doing everything it could to capitalize on the hot AI trend. Now the reverse is true.”

Alphabet may be digging itself a big hole and potentially wasting money if rivals like DeepSeek have shown that it is possible to do things much cheaper.

“Alphabet’s Google operations have been king of the search world for several decades. The evolution of AI now threatens to knock Google off the top of the mountain,” Coatsworth noted.

“ChatGPT and Microsoft Copilot use AI-powered search to great effect, and the more these services become embedded into everyday lives – either through their personal devices or at work – the bigger the threat to Google is,” he concluded.