Google parent company Alphabet Inc is moving to ramp up its artificial intelligence spending despite posting a disappointing quarterly earnings report this past week that fell short of expectations in certain areas. The tech giant’s adjusted earnings came in at $1.89 per share while its revenue was $84.7 billion, with both figures marginally beating Wall Street expectations.
Despite positive earnings results overall, Alphabet’s YouTube business posed a cause for concern, with ad revenue falling short of expectations. Google’s cloud business, however, emerged strong, beating market expectations.
CEO Sundar Pichai explained that while the company’s expenses may have become exorbitant, it will not slow down its spending on artificial intelligence. “The risk of under-investing is dramatically greater than the risk of over-investing for us here,” Pichai stated during the company’s recent earnings call. According to RBC Capital Markets internet analyst Brad Erickson, Alphabet has the funding required to invest in AI, with cash flow concerns being more of a near-term issue, with AI investments poised to provide long-term financial benefits.
“Is the company sort of structural return on invested capital declining? Yeah, I think you can you can probably make that argument. But to his [Pichai’s] point, if this opportunity does turn out to be as big as many think over time, these investments will have proven correct,” Erickson.