TLDR:
- Alphabet’s Q4 earnings beat EPS estimates but missed on cloud revenue, with shares dropping 8% in pre-market trading
- Company announced dramatic increase in planned capital expenditure from $57.9B to $75B for 2025
- Google Cloud revenue hit $11.9B, falling short of expected $12.1B, while advertising revenue exceeded expectations at $72.4B
- Cloud growth deceleration attributed to capacity constraints according to CFO Anat Ashkenazi
- Wall Street analysts maintain mixed ratings but express concern over cloud performance and higher capital expenditure plans
Alphabet, Google’s parent company, saw its stock price tumble in pre-market trading Wednesday, dropping 8% after reporting mixed fourth-quarter results that revealed weakness in its cloud computing segment and unveiled plans for substantially higher spending in 2025.
The tech giant reported earnings per share of $2.15, slightly above analyst expectations of $2.13. Overall revenue came in at $96.4 billion, just shy of the projected $96.6 billion target, with the shortfall primarily driven by underperformance in its cloud division.

Google Cloud generated revenue of $11.9 billion during the quarter, missing Wall Street’s anticipated $12.1 billion. This disappointment in cloud performance mirrors similar challenges faced by competitor Microsoft, which recently reported cloud revenue below expectations despite 21% year-over-year growth.
The company’s advertising business showed strength, with revenue reaching $72.4 billion, surpassing analyst estimates of $71.7 billion. YouTube’s ad sales demonstrated robust growth, increasing by 13.8% during the quarter.
In a notable development that caught investors’ attention, Alphabet announced plans to increase its capital expenditure to $75 billion for 2025, up substantially from $57.9 billion. This 43% increase follows a 63% rise in spending during 2024.
CFO Anat Ashkenazi addressed the cloud segment’s performance during the earnings call, attributing the slower growth to being “capacity constrained” while emphasizing that demand remains strong. However, this explanation failed to calm investor concerns about the deceleration in cloud growth from 35% in the third quarter to 30% in the fourth quarter.
The company’s search business continued to show momentum, posting 13% growth for the quarter. This performance helped drive Alphabet’s shares up 41% over the past 12 months, outperforming both Amazon’s 39% gain and Microsoft’s 2% increase during the same period.
Wall Street analysts offered mixed reactions to the results. DA Davidson maintained a neutral rating with a $200 price target, citing disappointment with the top-line miss and cloud growth deceleration. Pivotal Research Group kept its buy rating and $225 target price but noted that slower growth in cloud computing combined with higher capital expenditure presents a “tough combo.”
JP Morgan adjusted its price target downward from $232 to $220 while maintaining an overweight rating. The firm highlighted concerns about three key areas: 2025 capital expenditure, cloud revenue trajectory, and margin expansion potential.
The earnings report comes as Alphabet faces various external challenges. China recently announced an antitrust probe into Google, widely viewed as a response to President Trump’s 10% tariff on Chinese goods. The company is also contending with competition from China-based DeepSeek’s AI models, which have gained attention for their cost-effectiveness and capabilities.
Alphabet continues to navigate regulatory pressures, including an ongoing appeal of a court ruling that found the company abused its monopoly power in the search business. While government lawyers have suggested a potential breakup as a remedy, the market has largely dismissed immediate concerns about drastic structural changes.
The company’s operating income margin reached 32.1% during the quarter, showing improvement but slightly below expectations. Questions remain about Alphabet’s ability to expand margins in 2025 given the outlook for slower revenue growth and accelerating depreciation costs.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support