Image Source: Pixabay
Silicon Valley is still reeling from the sudden rise of China’s “budget” AI startup DeepSeek, which rocked the industry when it said it had created an AI model that rivals cutting-edge programs at a fraction of the cost. Google parent Alphabet has been among the companies that are feeling the heat. That’s because Wall Street had been pushing Alphabet and other tech giants to justify their high levels of spending on AI, and the pressure may ratchet up this quarter. Investors will be listening for any clues Alphabet executives give about their plans for capital expenditures this year. In her first earnings call with the company in October, Chief Financial Officer Anat Ashkenazi said she expects Google’s spending to increase considerably next year. Will she reaffirm that guidance today and will she give more specifics?But while we wait for the call, the company has released its Q4 earnings and they are a mess, with the company missing on top line revenue, and on cloud sales, while guiding sharply higher on CapEx, sending GOOGL stock tumbling 7% after hours.Here is what GOOGL reported for Q4:

While revenue in search, advertising and YouTube businesses was better than forecast, traders are focused on the Google Cloud revenue number, which was 1.9% below the consensus forecast. Google Cloud operating income was a 2.7% beat at $2.1 billion, up from $864 million a year earlier.Despite the disappointing cloud results, Alphabet revenue was up 12% year-over-year overall. In a statement, the company flagged search and YouTube ad revenue as bright spots for the quarter.
Here are the segment operating results:

“Our results show the power of our differentiated full-stack approach to AI innovation and the continued strength of our core businesses,” CEO Pichai said in a statement.Google’s Q4 capital expenditures were $14.28 billion, above the estimate $13.21 billion. Some more thoughts from UBS on the lousy quarter:

But while the company’s historical numbers were disappointing, the one number that everyone was focused on was Google’s full year capex guidance, which the company said would be $75 billion for 2025; this is well above the $57.9 billion expected, and furthers the narrative that the hyperscalers are not paring back spending (post DeepSeek fears) at least not just yet.Alphabet’s announcement that it plans to invest $75 billion in capital expenditures this year is notable. As Bloomberg notes, The company has been under pressure to show how its heavy investments in AI are translating into concrete results for the business — and that pressure is likely to intensify in the wake of DeepSeek’s breakthrough. But while GOOGL continues to spend like a drunken sailor, it has so far failed to show any outsized returns for this massive spend, something which the market will sooner or later start to notice..It may already be noticing: Alphabet shares are down 7.5% as investors appeared happy to fade the move over $200 given full valuation. Looking ahead to the earnings call, the most important things on the call will be commentary on: 1) AI overviews and impact on engagement/monetization; 2) cost savings/budgeting (especially under the new CFO); and 3) directional capex commentary.More By This Author:Job Openings Unexpectedly Crater By More Than 500K As Wheels Start To Fall Off The Job Market
US Factory Orders Declined Overall In 2025
Banks Report Tighter Standards, Growing Loan Demand As Conditions Ease Some More