Alphabet Says It Will "Double AI Investment"... Stock Falls Despite Strong Earnings [New York Notable Stocks]

Alphabet, Google's parent company, reported results that far exceeded market expectations. At the same time, it revealed a plan to double its artificial intelligence (AI) investment this year, but concerns over increased spending came to the fore and the share price fell instead.

On February 4 (local time), Alphabet announced its results for the fourth quarter of last year (October to December). According to the announcement, total revenue came in at 113.83 billion dollars, up 18% from the same period a year earlier. Net income also jumped 30% to 34.46 billion dollars. Annual revenue exceeded 400 billion dollars for the first time ever, and earnings per share (EPS) were 2.82 dollars. All of these figures were far above market expectations.

By business segment, revenue from the core search and advertising division grew 17% to 63.1 billion dollars, and YouTube advertising revenue also increased 9% to 11.4 billion dollars. In particular, the cloud division, driven by growing demand for AI model training and operations, saw revenue surge 48% to 17.7 billion dollars.

Alphabet said this year’s capital expenditures are expected to reach between 175 billion and 185 billion dollars. This is far above the market consensus of 152.6 billion dollars. Newly appointed Chief Financial Officer (CFO) Anat Ashkenazi explained on the earnings call, "These funds will be invested in expanding the AI computing capacity of Google DeepMind, responding to cloud customer demand, and other strategic investments in new businesses."

The market appears to be concerned that this could amount to overinvestment. Despite the strong results, Alphabet Class A common shares saw a sharp drop, at one point falling 7% in after-hours trading. Although they later pared some of the losses, the shares are still down by around 1% to 2%.