Alphabet shares fall as Google Cloud growth slows
Alphabet Corporation announced its fourth-quarter results. The indicators did not meet analysts’ expectations. The main factor was a slowdown in Google Cloud’s growth rate, which caused the company’s shares to fall by more than 7%.
The company also unveiled financial plans for 2025, including an increase in capital expenditure to US$75 billion. Investors reacted negatively to this news, which affected the dynamics of the share price. A significant part of Alphabet’s spending is on the development of data centres. However, their efficiency is not yet up to expectations.
The decline in the growth rate of Google Cloud has become quite noticeable for Alphabet. However, the cloud is not a major source of revenue for the company. The business relies primarily on the Google search engine and YouTube advertising. These areas are growing steadily.
In the fourth quarter of 2024, the company’s revenue was around US$96.5 billion. Compared to the same period in 2023, this figure increased by 12%. In the third quarter, the increase was 15%.
Google’s services, including Google Search and YouTube advertising, generated more than US$84 billion in revenue, an increase of 10%. In 2024, the combined revenue of Google Cloud and YouTube reached US$110 billion.
According to CEO Sundar Pichai, the company has shown good results. However, the performance was lower than analysts had expected. This suggests the need for a change in strategy, particularly for Google Cloud.
Google Cloud performance overview
At the end of 2024, Alphabet’s cloud technology showed the following results:
– the division’s sales were around US$11.96bn;
– analyst estimate was US$12.2 billion;
– annual growth of 30%, down from 35% in the third quarter;
– sequential growth of 5.4%, down from 9.6% in the third quarter.
It is also worth noting that Google Cloud is losing ground to competitors in the global cloud market. Microsoft’s Azure and Amazon Web Services remain the main players.
Overview of other divisions
In addition to the above divisions, Alphabet’s structure includes Other Bets. This division comprises Waymo’s autonomous services and Verily’s science division. Here, revenues totalled US$400 million, down 39% from 2023. The division also reported an operating loss of US$1.17 billion.
Waymo is one of the first robot taxi services in the US, operating in Los Angeles, San Francisco and Phoenix. Despite the losses, the division is well-positioned to become a major player in the autonomous car market. Waymo plans to launch its taxis in Tokyo in 2025.
