Logos for Google and its official Alphabet corporate name
In a surprising turn of events, Google’s parent company, Alphabet Inc., recently reported earnings that fell short of Wall Street’s expectations. The tech giant, long celebrated for its robust advertising business and burgeoning cloud division, attributed the miss primarily to slower-than-expected growth in its Google Cloud segment.
Alphabet reported total revenue of $96.5 billion for the fourth quarter of 2024, representing a year-over-year increase of 12%. However, this figure fell below analysts’ consensus estimate of $98.0 billion. Net income stood at $26.5 billion, translating to earnings per share of $2.15, which also missed the expected $2.25 per share.
While the company’s core advertising business remained relatively stable, generating $67.0 billion in revenue, the real concern stemmed from the underperformance of Google Cloud. The division, which includes Google Cloud Platform and Google Workspace, reported revenue of $12.0 billion, marking a growth rate of 30% compared to the previous year. This was significantly lower than analysts’ expectations of $12.5 billion.
The deceleration in Google Cloud’s growth underscores the intensifying competition in the cloud computing market. Amazon Web Services and Microsoft Azure continue to dominate the sector as they compete for market share.
Despite ongoing investments in AI and machine learning capabilities to differentiate its cloud offerings, Google faces pressure to demonstrate tangible returns. The rise of hybrid and multi-cloud solutions has further fragmented the market, compelling providers to offer more competitive pricing and customized services.
“We remain committed to our long-term cloud strategy, focusing on AI-driven solutions and strategic partnerships to drive future growth,” said Alphabet CEO Sundar Pichai to explain the increase in capital expenditures.
“We are confident in the trajectory of Google Cloud as we navigate a dynamic market environment,” added Ruth Porat, Alphabet’s Chief Financial Officer. She noted that while cloud revenue growth was slower than anticipated, the division remains a key pillar of Alphabet’s long-term strategy.
The earnings miss also raises questions about broader economic trends affecting the overall tech sector. Companies like Google are counting on AI and quantum computing for future growth, but market-ready applications are still 3-5 years away.
At Wednesday’s opening bell, Google stock fell 8% changing hands at $191 a share.
