In his fourth-quarter earnings report yesterday, the company said that Alphabet (GOOGL) is Google (GOOGL) and he hopes to spend an astonishing $75 billion in 2025 to “accelerate” its AI progress. The figure is up more than 40% from last year’s AI spending and shocked Wall Street, causing letter stocks to fall by more than 8%.
“This is a big increase, and it shows that letters are thrown into the kitchen sink with their AI plans,” said Kathleen Brooks, director of research at XTB. More worried about investors, letters are more profitable than money,” said Kathleen Brooks, director of research at XTB. It’s faster. Alphabet’s Google Cloud revenue, which Brooks has described as “the clearest way to see if Google is profiting from AI” and earned $12 billion in the October-December quarter, a 30% increase from the same period in 2023, but Lower than analysts expected. .
Alphabet’s quarterly total revenue was $96.5 billion, up 12% from the same period last year. Revenue from Google services, including its core online search business, rose 10% to $84 billion, while revenue from other Alphabet betting divisions fell 39% to $400 million.
When asked if revenues could be higher with more resources, letters chief financial officer Anat Ashkenazi told analysts yesterday that the company “retreats this year and demand exceeds our available capacity.” Ashkenazi added , which helps increase capital expenditure decisions and designate investments specifically for servers, data centers and networks.
CEO Sundar Pichai assured investors that AI costs will eventually drop, which is the initial investment. “Part of the reason we’re very excited about the AI opportunity is that we know we can drive extraordinary use cases because the cost of actually using it will continue to drop,” he said. “It’s as big as it is, and that’s why you see us investing in it.” That moment.”
Alphabet is not the only major technology company to enrich its AI infrastructure. Microsoft (MSFT) plans to spend $80 billion on AI data centers in 2025, a significant increase compared to the $50 billion spent in fiscal 2024. Meta (Meta) is expected to reach $65 billion this year, compared to $39 billion last year. However, letters are the only ones who suffered a stock sell-off after announcing such plans. “Why is Google hit again by major infrastructure investments, and Meta’s 60%+ CAPEX growth in 2025 is accepted by the streets?” JPMorgan analyst Doug Anmuth asked in client notes.
Letters are facing increasing pressure to fulfill their AI commitments. Raymond James’ Josh Beck urged letters to generate search summary for their AI (called AI overview) and Gemini model use cases to “illuminate monetization potential” in an analyst noted. . During yesterday’s earnings call, Pixi laughed at the company for “having good ideas about the concept of local advertising.” He also reiterated the plan for Google to offer free and paid subscriptions to Gemini products.
Big Tech’s large capital expenditures are also given the heat of Chinese artificial intelligence company DeepSeek, which claims to be able to use less resources to build powerful AI models. Pichai praised DeepSeek’s “huge team” for being “very, very good work”, but added that Gemini’s inference model is comparable to DeepSeek in terms of efficiency.
