The Alphabet stock drop marked the company’s fifth-worst trading day in a decade as disappointing cloud growth and aggressive AI spending plans triggered a massive stock selloff. The company reported total revenue of $96.5 billion in Q4, up 12% year-over-year.
Understanding the Alphabet Stock Drop
The company’s shares plunged 8% on Wednesday, erasing approximately $180 billion in market value. Revenue excluding traffic acquisition costs was $81.6 billion, missing analyst estimates of $82.8 billion. Meanwhile, net income rose 28% to $26.5 billion.
Cloud Performance Fuels Stock Drop
Google Cloud revenue grew 30% to $12 billion in the fourth quarter, falling short of analysts’ $12.2 billion forecast and marking a significant slowdown from the previous quarter’s 35% growth rate. This deceleration came as the division faced capacity constraints, according to CFO Anat Ashkenazi.
Record AI Investment Plans
Fourth-quarter capital expenditure jumped to $14.3 billion, up from $11 billion last year. Looking ahead, Alphabet announced $75 billion in planned capital expenditure for 2025, up from $53 billion in 2024 and exceeding analyst estimates by $17 billion. This aggressive spending plan intensified investor concerns about profitability.
Core Business Performance
Google’s search advertising brought in $54 billion in sales, slightly beating estimates. YouTube exceeded expectations with $10.5 billion in revenue, compared to projected $10.2 billion.
Regulatory Challenges
Alphabet faces multiple regulatory hurdles, including a U.S. court ruling that found Google’s search business engaged in monopolistic behavior. The company also faces antitrust investigations into its ad tech business, with key proceedings expected in 2025. Additionally, Chinese authorities have recently revived antitrust investigations into Google’s Android mobile operating system.
Sources: Yahoo Finance, Financial Times, Economic Times