Alphabet Shares Plummet 7% Amid Revenue Miss and Bold AI Investment Strategy

"Alphabet Stock Drops 7% After Revenue Miss and AI Spending Plans"

Alphabet's shares fell over 7% after missing revenue expectations and announcing a $75 billion AI spending plan, despite a 12% revenue increase.

Rachel Patel6 hours agoLast Update : 6 hours ago

Alphabet shares fall 7% on revenue miss, heightened AI investments

www.cnbc.com

Alphabet shares fell more than 7% in premarket trading on February 5, 2025, following the company’s disappointing fourth-quarter revenue report. The decline came after Alphabet, which includes Google, announced plans to significantly increase its spending on artificial intelligence infrastructure, raising concerns among investors.

6 Key Takeaways

Alphabet shares dropped over 7% premarket
Fourth-quarter revenue missed Wall Street expectations
Planned $75 billion spending on AI buildout
YouTube and search business growth slowed
Analyst highlights costs and cloud revenue issues
Capital expenditures higher than analyst estimates

Fast Answer: Alphabet shares dropped over 7% after the company reported fourth-quarter revenues of $96.47 billion, below expectations. The firm plans to spend $75 billion on capital expenditures to enhance its AI capabilities, exceeding analyst forecasts.

Alphabet’s fourth-quarter revenue of $96.47 billion fell short of the $96.56 billion expected by analysts, according to LSEG. Despite this, the company exceeded earnings estimates by 2 cents per share. Year-over-year, Alphabet’s revenues grew by 12%, although growth in its YouTube advertising and search business showed signs of slowing.

The company announced plans to invest $75 billion in capital expenditures to support its AI initiatives, which is significantly higher than the $58.84 billion forecasted by analysts. Finance chief Anat Ashkenazi stated that this investment would primarily focus on technical infrastructure, including servers, data centers, and networking.

Key details from the earnings report include:

Fourth-quarter revenue: $96.47 billion
Expected revenue: $96.56 billion
Year-over-year revenue growth: 12%
Planned capital expenditures: $75 billion
Previous analyst estimate for capex: $58.84 billion

Analysts have pointed to the increased expenses and cloud revenue as factors contributing to the stock’s decline post-earnings. The higher spending on AI infrastructure reflects Alphabet’s strategy to compete with other major tech companies in the rapidly evolving AI landscape.

Notice: Canadian investors should monitor Alphabet’s developments closely, as changes in AI spending and revenue performance may affect market dynamics and investment strategies in the tech sector.

In summary, Alphabet’s disappointing revenue figures and ambitious spending plans have raised concerns among investors, leading to a significant drop in share prices. The company’s focus on AI infrastructure is seen as a critical move to maintain competitiveness in the technology market.