Alphabet is set to come under the microscope from investors regarding its significant spending on artificial intelligence (AI) when it releases its earnings report on Tuesday. A slowdown in revenue growth during the holiday quarter is anticipated, attributed to a decline in both its advertising and cloud services.
Like many major technology companies in the United States, Alphabet is facing increased scrutiny over its capital expenditures. This comes in the wake of the recent launch of affordable AI models by Chinese startup DeepSeek, which could trigger a price war in the AI sector.
Last year’s capital expenditure for Alphabet is projected to be around $50 billion (approximately Rs. 4,35,530 crore), according to LSEG, with further investments anticipated in 2025 to bolster its cloud expansion and AI-enhanced search functions. These initiatives, including summary features, are crucial for maintaining its market dominance and attracting additional advertising revenue.
Executives from Microsoft and Meta Platforms defended their substantial AI expenditures last week, emphasizing their importance in maintaining a competitive edge in this evolving area.
In the meantime, growth in Google Cloud is expected to slow during the fourth quarter, despite high expectations for the segment.
“Although the rate of growth for the cloud unit is likely to decelerate, investment levels are still projected to remain elevated, while efficiency gains have so far supported profit margins. Balancing these factors will be essential, and investors will be looking for indicators of this,” stated Susannah Streeter, head of money and markets at Hargreaves Lansdown.
According to Visible Alpha estimates, revenue from Google’s Search and Other services is anticipated to rise by 11.2 percent in the fourth quarter, a decrease from a 12.2 percent increase in the preceding quarter.
Alphabet’s overall revenue growth is projected to be 11.9 percent, amounting to $96.6 billion (around Rs. 8,41,537 crore), reflecting a slowdown from the previous quarter, based on estimates from LSEG.
With over 2 billion monthly users for its Search and YouTube platforms, the company is actively working to maintain its leading position in the search advertising market amid increasing competition from e-commerce giant Amazon and social media platforms like TikTok.
Increased political advertising related to the upcoming US Presidential elections may have provided a boost to Google during the fourth quarter, following a similar uplift reported by Meta.
Nevertheless, Meta’s tempered forecast for the first quarter has heightened concerns about the broader advertising market, particularly amid growing economic uncertainties and potential global tariff threats.
Focus on Cloud
There are high expectations for Google Cloud following its most rapid growth in two years in the September quarter, spurred by rising AI investments from businesses.
Alphabet’s shares have seen an increase of approximately seven percent this year, building on a 35 percent rally the previous year, fueled by rising investor trust in the company’s AI initiatives.
However, concerns about a potential slowdown have intensified since last week, after Microsoft reported underwhelming figures, with its Azure cloud computing growth slowing in the December quarter due to a focus on AI services over its core cloud offerings.
“We will be watching closely to see if Google encounters similar challenges to those faced by Microsoft, where AI fueled growth but the main cloud business struggled. It’s essential to determine that this isn’t the case for Google,” commented D.A. Davidson analyst Gil Luria.
According to LSEG data, Google Cloud is expected to report a 32 percent increase in revenue during the fourth quarter, following a 35 percent growth in the third quarter. This performance would surpass that of larger competitor Microsoft’s 31 percent rise and Amazon’s estimated 19 percent increase.
© Thomson Reuters 2025
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
