San Francisco (AFP) – Google’s parent company Alphabet on Tuesday reported revenue jumped in the recently-ended quarter, but shares sank on concerns it may be pouring too much money into artificial intelligence. Google and rivals are spending billions of dollars on data centers and more for AI, while meaningful returns on investments remain elusive and the rise of lower-cost model DeepSeek from China raises questions about how much needs to be spent.
“We are pushing the next frontiers from AI agents, reasoning and deep research to state-of-the-art video, quantum computing and more,” Alphabet chief executive Sundar Pichai said during an earnings call. “The company is in a great rhythm and cadence, building, testing, and launching products faster than ever before.” Pichai said this is translating into increased use of its products, including AI search summaries that are now available in more than 100 countries.
Alphabet said revenues jumped 12 percent to $96.5 billion in the quarter, but the company’s share price sank more than 7 percent in after-hours trading as investors were disappointed by lower-than-expected revenue growth and the company’s ambitious capital spending forecast for 2025. Google Cloud revenue, while growing 30 percent to $12 billion, fell short of expectations, raising questions about the division’s ability to compete with rivals in the heated AI infrastructure market.
“Q4 was a strong quarter driven by our leadership in AI and momentum across the business,” Pichai said. “We’ll continue to invest in our cloud business to ensure we can address the increase in customer demand.” Pichai added that Google is working on “even better thinking models” that it will share with developers soon. Alphabet announced plans to invest approximately $75 billion in capital expenditures in 2025, a figure that surprised analysts and highlighted the mounting costs of AI development.
Like other tech giants, Alphabet is betting heavily on artificial intelligence across all of its products. “Part of the reason we are so excited about the AI opportunity is we know we can drive extraordinary use cases because the cost of actually using it is going to keep coming down,” Pichai said. “The opportunity space is as big as it comes, and that’s why you’re seeing us meeting that moment.” In December, the company announced the launch of Gemini 2.0, its most advanced AI model to date.
The company’s core Google Services segment, which includes search and YouTube, posted revenues of $84.1 billion, up 10 percent year-over-year. Within this segment, YouTube advertising revenue grew to $10.5 billion, while Google Search revenue reached $54 billion. Pichai told financial analysts that autonomous car division Waymo made “tremendous progress” last year and its robotaxi service is averaging 150,000 trips weekly. Waymo One robotaxi operations will expand to Austin and Atlanta this year, and to Miami next year, according to Pichai. “And in the coming weeks, Waymo One vehicles will arrive in Tokyo for their first international road trip,” Pichai said.
The company’s workforce remained largely stable at 183,323 employees, reflecting ongoing cost control measures. Hanging over Google in 2025 are two major antitrust cases in the United States concerning the company’s dominant position in search engines and ad technology. A US judge has already found Google operating an illegal monopoly in search, and the company faces potential forced restructuring, including the possible sale of Chrome, its world-leading web browser.
Meanwhile, Britain’s competition watchdog recently launched its own investigation into Google’s search engine market dominance and its impact on consumers and businesses. The decision in the US ad tech case is expected in the coming weeks. “Between defending itself against antitrust lawsuits from multiple governments, courting US TikTok advertisers to capitalize on a yet-elusive ban, reconfiguring search around generative AI, and convincing the market to invest in Gemini, Google is fighting ongoing battles on several fronts,” said Emarketer senior analyst Evelyn Mitchell-Wolf. “Against this chaotic backdrop, Google’s core ads business has maintained healthy growth.”
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