Alphabet Shares Drop Following Slower Cloud Revenue Growth
Mountain View, Wednesday, 5 February 2025.
Alphabet’s shares fell nearly 8% as cloud revenue growth missed analyst expectations, highlighting investor concerns about future AI infrastructure investments and competitive positioning in the market.
Market Impact and Financial Performance
Alphabet Inc. (GOOGL) experienced a significant market setback as shares tumbled 7.5% in after-hours trading [4] following its Q4 2024 earnings release on February 4, 2025 [2]. While the company reported overall revenue of $96.47 billion, representing a 12% year-over-year increase [2][3], Google Cloud revenue of $11.96 billion fell short of analyst expectations of $12.19 billion [4]. The company’s earnings per share reached $2.15, slightly exceeding the anticipated $2.13 [4].
Cloud Performance and AI Investment
Google Cloud’s performance, despite showing a 30% year-over-year growth [2], raised concerns among investors about the company’s competitive position in the cloud computing market. CEO Sundar Pichai noted that cloud customers are now consuming more than eight times the compute capacity compared to 18 months ago [3]. To address growing demand, Alphabet announced plans to invest approximately $75 billion in capital expenditures during 2025 [2][3], significantly exceeding analyst expectations of $57.9 billion [4].
Capacity Constraints and Future Outlook
CFO Anat Ashkenazi acknowledged that the company faced capacity constraints in Q4 2024, stating, ‘We exited the year with more demand than we had available capacity’ [3]. The substantial capital expenditure commitment for 2025 appears aimed at addressing these limitations, with $16-18 billion expected to be invested in the first quarter alone [6]. The focus will be on expanding infrastructure, including servers and data centers [6].