Alphabet plans massive capex hike, reports cloud revenue growth slowed
- Alphabet said on Tuesday it will spend $75 billion on its AI buildout this year, 29% more than Wall Street expected, and investors signaled disappointment at a missed cloud revenue target and began showing impatience over profitability.
CEO Sundar Pichai defended the dramatic increase on a conference call with analysts, who are raising new questions about capital spending by Google and U.S. rivals following the emergence of China's DeepSeek, which offers cut-rate AI. He said Google's Gemini family of AI models is comparable in efficiency to DeepSeek.
Alphabet plans to spend $16 billion to $18 billion in the first quarter, a far bigger number than the roughly $6 million DeepSeek said it spent on the final training run to develop its AI model.To be sure, developers at leading U.S. AI firms said the total training cost was likely magnitudes larger. But revelations around DeepSeek's training cost in January shocked tech stocks, contributing to Nvidia's record one-day drop of $593 billion in market value.
"When you start to see that revenue level off or at least the growth start to top off a little bit, how you're going to finance the future growth of the company becomes an issue," he said. Larger cloud rival Microsoft also reported weaker-than-expected growth in its Azure cloud platform last week. Shares of Amazon, the largest cloud provider, which will publish quarterly results on Thursday, were down 1.8% in after-hours trade.
Ad revenue from YouTube grew 13.8% to $10.47 billion in the fourth quarter, compared with the 12.2% growth in the third quarter. Chief business officer Philipp Schindler said the growth was helped by U.S. election advertising, with combined spending by Democrats and Republicans nearly doubling compared with the 2020 election.
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