Shares in Google parent Alphabet fell more than 6 percent overnight, after Wall Street absorbed the tech giant had slightly missed its Q4 revenue target on Tuesday.
Indeed, investors opted to continue to punish Alphabet despite a very strong fourth quarter and full year fiscal performance, and on Wednesday afternoon it’s share price was still down 7 percent at $193.00.
However, it seems investors (besides the Q4 revenue miss) were also not impressed at stalling cloud growth, as well just announced plans for a big capital-spending increase to accelerate its AI-investment strategy.
Q4, FY24 financials
Google, like other big name players in the tech sector, is working hard to integrate AI technologies into its core offerings, as Google Search remains its main money maker.
For the fourth quarter ending 31 December, Alphabet posted a net profit of $26.5bn, up from a net profit of $20.7bn in the same year-ago quarter.
Revenues also increased 12 percent to $96.5bn from $86.3bn a year earlier.
But that $96.5bn had missed analyst expectations of $96.67bn.
For the full year Alphabet posted an annual net profit of $100.1bn, from $73.8bn in 2023.
Annual revenues rose to $350bn from $307.4bn in 2023.
“Q4 was a strong quarter driven by our leadership in AI and momentum across the business,” said CEO Sundar Pichai. “We are building, testing, and launching products and models faster than ever, and making significant progress in compute and driving efficiencies. In Search, advances like AI Overviews and Circle to Search are increasing user engagement.”
“Our AI-powered Google Cloud portfolio is seeing stronger customer demand, and YouTube continues to be the leader in streaming watchtime and podcasts,” said Pichai. “Together, Cloud and YouTube exited 2024 at an annual revenue run rate of $110 billion. Our results show the power of our differentiated full-stack approach to AI innovation and the continued strength of our core businesses. We are confident about the opportunities ahead, and to accelerate our progress, we expect to invest approximately $75 billion in capital expenditures in 2025.”
Heavy spending
But the financial results also revealed that Google spent more than $52 billion last year on new data centres and services, as well as purchasing AI chips from market leader Nvidia.
Google also told investors it likely would spend as much as $75 billion more this year, which was $15 billion more that Wall Street had forecasted.
Matters were not helped when the financials also revealed that Google recorded a quarter-on-quarter decline in cloud revenue at $11.95bn from $9.2bn a year earlier – this missed Wall Street expectations of $11.96bn.
Google Search saw Q4 2024 revenues of $54bn, compared to $48bn in Q4 2023; YouTube ads brought in $10.5bn in Q4 2024 from $9.2bn in Q4 2023 (likely down to a notable increase in the number of ads now in YouTube videos); Google Network Q4 2024 revenue declined to $7.9bn from $8.3bn in Q4 2023; and Google Advertising Q4 revenue in 2024 was $72.5bn compared to $65.5bn in Q4 2023.
Google’s “Other Bets” only recorded $400m in Q4 2024, down from $657m in Q4 2023.
Alphabet stated it had 183,323 staff as of 31 December 2024, an increase from the 182,502 staff at 31 December 2023.