Alphabet (GOOGL.O) is set to report earnings on Tuesday, with investors closely watching its massive AI spending amid slowing revenue growth due to weaker advertising and cloud business performance. The Google parent, like other tech giants, faces growing pressure over capital expenditures, especially after Chinese startup DeepSeek introduced low-cost AI models that could ignite a price war.
Estimates from LSEG suggest Alphabet’s capital expenditure reached $50 billion in 2024, with further investments planned for 2025 to expand its cloud business and AI-driven search features. Microsoft and Meta recently defended their AI spending, arguing that such investments are essential to maintain leadership in the evolving tech landscape.
Google Cloud’s growth is expected to decelerate in Q4, despite strong expectations for the segment. According to Susannah Streeter of Hargreaves Lansdown, continued high investment coupled with efficiency gains has kept profits steady, but investors will seek reassurance that this balance can be maintained. Meanwhile, Google’s Search and Other business revenue likely rose 11.2% in Q4, a slight dip from the previous quarter’s 12.2% growth. Overall, Alphabet’s revenue is projected to climb 11.9% to $96.6 billion, marking a slowdown from Q3.
Alphabet continues to defend its dominant search advertising market share against rising competition from Amazon (AMZN.O) and social media platforms like TikTok. Increased political ad spending ahead of the U.S. Presidential election may have provided a temporary boost, following a similar trend observed at Meta. However, Meta’s cautious Q1 forecast has raised concerns about the overall advertising market amid economic uncertainty and global tariff threats.
Expectations for Google Cloud remain high after the unit posted its fastest growth in two years in Q3, fueled by rising AI investments. Alphabet’s stock has gained 7% in 2025, following a 35% rally last year, driven by optimism over its AI strategy. Still, concerns about a sharper-than-expected slowdown persist, especially after Microsoft’s Azure cloud growth weakened in Q4 as it prioritized AI services over core cloud offerings.
Analysts will be watching whether Google Cloud mirrors Microsoft’s challenges or maintains robust growth. LSEG data projects Google Cloud to report a 32% revenue increase in Q4, down from 35% in Q3 but still surpassing Microsoft’s 31% rise and Amazon’s estimated 19% growth.
Source: Swifteradio.com
