Alphabet, the parent company of Google, announced on Tuesday that its revenue increased in the most recent quarter, but its stock fell due to worries that it might be overspending on artificial intelligence.
Google and its competitors are investing billions of dollars on data centers and artificial intelligence, but significant returns on investment are still difficult, and the emergence of China’s DeepSeek model, which is less expensive, raises concerns about how much money should be spent.
“We are pushing the next frontiers from AI agents, reasoning, and deep research to state-of-the-art video, quantum computing, and more,” Alphabet CEO Sundar Pichai stated during a call for earnings.
“The company is in a great rhythm and cadence, building, testing, and launching products faster than ever before.”
According to Pichai, this is resulting in more people using its products, such as the AI search summaries that are currently accessible in over 100 countries.
Although Alphabet reported a 12 percent increase in revenues to $96.5 billion during the quarter, investors were dissatisfied with the company’s ambitious capital investment plan for 2025 and the lower-than-expected revenue growth, which caused the share price to plummet more than 7% in after-hours trading.
Despite a 30% increase to $12 billion, Google Cloud’s revenue fell short of projections, casting doubt on the division’s capacity to compete with rivals in the fiercely competitive AI infrastructure market.
“Q4 was a strong quarter driven by our leadership in AI and momentum across the business,” Pichai said.
“We’ll continue to invest in our cloud business to ensure we can address the increase in customer demand.”
Google is developing “even better thinking models” that it will soon make available to developers, Pichai continued.
Analysts were taken aback by Alphabet’s announcement that it would invest roughly $75 billion in capital expenditures in 2025, which brought attention to the growing expenses of AI development.
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