In a positive sign for Amazon.com's cloud computing business, Google-parent Alphabet has joined Microsoft in pointing to a shortage in data center capacity as customers ramp up artificial intelligence workloads. Google stock fell with Amazon earnings due after the market close on Thursday.
Further, Google said fourth quarter cloud-computing revenue rose 30% to $11.95 billion, missing estimates of $12.19 billion. Amazon is by far the biggest provider of cloud computing services. One view has been that Microsoft and Google could pick up market share amid the rise of generative artificial intelligence. But that may not be happening.
"We acknowledge (Google) cloud needing more capacity could have AI workload market share implications," said Justin Patterson, analyst at KeyBanc Capital markets, in a report.
Data centers are packed with computer servers that process AI workloads.
Google Stock: Capital Spending Booms In 2025
When Microsoft reported fiscal second quarter earnings on Jan. 29, the company said its Azure cloud computing business continues to be capacity constrained, slowing revenue growth.
Alphabet forecast capital spending of $75 billion in 2025, up about 43% from last year, above views. Wall Street had projected about $59 billion in 2025 capital spending for Google stock.
Meanwhile, Microsoft is aiming to spend $80 billion on AI infrastructure in fiscal 2025.
On Alphabet's earnings call with Wall Street analysts, the company said 4.4 million software developers now using Google's Gemini AI training model, double the number from six months ago.
But management said Google ended 2024 with "more (AI) demand than capacity."
Lumpy Cloud Computing Growth?
At Susquehanna, analyst Shyam Patil said in a report: "Cloud revenue of $12 billion grew 30% year over year, decelerating five points quarter over quarter. Google expects that cloud revenue growth rate could vary from quarter to quarter due to the timing of when capacity goes live."
On the stock market today, Google stock fell more than 8% to near 188.70. Amazon stock retreated more than 2% to near 236.23. Microsoft stock dipped a fraction to near 411.
Amid the emergence of Chinese startup DeepSeek, huge increases in capital spending by tech companies are under more scrutiny.
Microsoft is the biggest investor in generative AI leader OpenAI, having spent some $14 billion on the startup. But Oracle will now be a big provider of data center capacity to OpenAI for training AI models.
Amazon has invested $8 billion in Anthropic, a rival of OpenAI. Much of Amazon's AI-related cloud demand comes from Meta Platforms, however.
Meta has developed its Llama family of open-source AI models.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
