Alphabet, the parent company of Google and YouTube, saw its stock drop by more than 7% on Tuesday. This was a result of a worse-than-expected fourth-quarter earnings report that missed revenue and included massive spending on artificial intelligence.
Alphabet reported $2.15 in earnings per share for Q4, slightly coming above the $2.13 in EPS expected by Wall Street. However, the company’s revenue of $96.47 billion, which marked a 12% year-over-year jump, came below analysts’ estimations of $96.56 billion.
Alphabet also recorded slower growth in a number of departments compared to the year prior. The advertising revenue from Google grew by 10.6% on a year-over-year basis compared to 11% growth last year, while YouTube advertising revenue went from 15.5% growth to 13.8%. Additionally, the company’s cloud unit recorded $11.96 billion in revenue, a miss compared to $12.19 billion expected by analysts.
Investors also took notice of Alphabet’s intention to invest $75 billion in 2025 as it looks to continue expanding its AI capabilities. Wall Street previously forecasted that the company will have $58.84 billion in capital expenditures for this year. This caused concerns that the significant spending on AI will take time to pay off, hampering the company’s performance in the near future.
The shares of Alphabet sank by 7.29% on Wednesday to close at $191.33 per share. The stock now has a modest gain of 1% from the beginning of 2025.