Google parent Alphabet reported fourth quarter earnings that edged by consensus estimates while revenue came in slightly below views as cloud computing revenue growth slowed. Google stock tumbled although revenue growth in the core internet search-advertising business topped views amid artificial intelligence-driven competition.
Amid the emergence of Chinese startup DeepSeek, huge increases in capital spending by tech companies are under more scrutiny. 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.
AI Spending: Google Stock Versus Meta
Meanwhile, Facebook parent Meta Platforms has stated it plans to hike 2025 capital spending to a range of $60 billion to $65 billion, topping Wall Street estimates of $51.4 billion. Meta stock has advanced since it reported earnings Jan. 29, with one analyst commenting it has "earned the right to invest." But Google stock sold off on its Q4 results and 2025 capital spending outlook.
"Overall, (Google Q4) results unlikely to change narrative that Meta is seeing more upside from artificial intelligence," said Oppenheimer analyst Jason Helfstein in a report.
In Q4, Google capital spending reached $14.3 billion, roughly $1 billion more than consensus estimates.
"Unexpectedly, the company provided quantitative guidance for 2025 capex at $75 billion which was significantly ahead of Street at $58.7 billion and the primary reason for the stock's sell-off after-hours," said RBC Capital analyst Brad Erickson in a report. "AI spending is the culprit here."
He added that Meta's "story resonated better." Analysts expect AI to boost Meta advertising revenue in 2025. Further, Meta AI now has over 700 million monthly average users , and management believes it is now the No. 1 leading AI assistant.
On the Google earnings call with Wall Street analysts, Alphabet Chief Executive Sundar Pichai commented on the DeepSeek news.
"I think they've done very, very good work," he said. "You can drive a lot of efficiency with these models. Our obsession with cost per query, I think, sets us up well both to serve billions of users across our products and on the cloud side."
He added: "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 (AI) is going to keep coming down, which will make more use cases feasible. And that's the opportunity space. It's as big as it comes, and that's why you're seeing us invest to meet that moment."
Google Stock: Search-Advertising Revenue
Reported after the market close on Tuesday, Google earnings for the quarter ending Dec. 31 rose 31% to 2.15 per share. The tech giant reports Google earnings under generally accepted accounting principles, also known as GAAP.
In Q4, Google's gross revenue rose 12% to 96.46 billion amid headwinds from currency exchange rates and a strong U.S. dollar.
Analysts polled by FactSet had projected EPS of $2.13 on revenue of $96.7 billion.
Also, Google's Q4 internet search-advertising revenue came in at $54 billion, up 12%, versus estimates of $53.3 billion.
In 2025, analysts predict Google search-advertising growth of nearly 10% to $216.5 billion. Startup OpenAI's ChatGPT has been gaining global share, albeit slowly.
Cloud Revenue Misses Estimates
Further, Google said cloud-computing revenue rose 30% to $11.95 billion, missing estimates of $12.19 billion.
Meanwhile, YouTube ad revenue rose 14% to $10.47 billion versus estimates of $10.23 billion,
On the stock market today, Google stock 7% to near 192 in early trading.
Alphabet typically doesn't provide specific quarterly or annual guidance. But Alphabet's new chief financial officer, Anat Ashkenazi, was expected to lay out more of her priorities on the Q4 earnings call as Wall Street looks for more "operating efficiencies."
Further, Alphabet repurchased $15.55 billion of Google stock in Q4.
GOOGL Stock Technical Ratings
Heading into the Google earnings report, Alphabet stock had gained 9% in 2025.
Further, Alphabet stock holds an IBD Composite Rating of 99 out of a best possible 99, according to IBD Stock Checkup. IBD's Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths. The best growth stocks have a Composite Rating of 90 or better.
Google is among AI stocks to watch.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
