Alphabet, the parent company of Google, is set to report earnings on Tuesday, facing intense investor scrutiny over its significant spending on artificial intelligence. The company’s revenue growth is expected to have slowed in the holiday quarter due to declining performance in its advertising and cloud businesses.
AI Investments and Competitive Pressures
Alphabet, like other U.S. tech giants, is under pressure to justify its soaring capital expenditures. The recent launch of low-cost AI models by Chinese startup DeepSeek has intensified competition in the AI industry, potentially sparking a price war. As a result, investors are closely monitoring Alphabet’s financial strategy.
According to estimates from LSEG, Alphabet’s capital expenditure for 2024 was around $50 billion, with more investment planned in 2025. The spending supports cloud expansion and AI-driven search features, including AI-generated summaries, which are crucial for maintaining market dominance and boosting ad revenue.
“Technology news today” highlights how major players such as Microsoft and Meta have recently defended their own AI investments, arguing that they are essential for staying ahead in this fast-evolving industry. Alphabet is expected to follow suit in its upcoming earnings call.
Google Cloud Growth Slows
Despite high expectations, Google Cloud’s growth is predicted to decelerate in the fourth quarter. While investment in AI remains strong, analysts worry about efficiency gains and the ability to maintain profit margins.
“Although Google Cloud’s growth rate is slowing, its investment levels remain high,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown. “The key challenge will be sustaining this balance, and investors will want clear evidence of this in the earnings report.”
According to Visible Alpha estimates, revenue from Google’s Search and Other business likely grew 11.2% in the fourth quarter, compared to 12.2% in the third quarter. Overall, Alphabet’s total revenue is expected to rise 11.9% to $96.6 billion, marking a slowdown from the previous quarter.
Rising Competition in Search Advertising
Alphabet’s dominance in the search advertising market is being challenged by Amazon and social media platforms like TikTok. With more than 2 billion monthly users across Search and YouTube, Google remains a leader in digital advertising. However, increasing competition could impact its future growth.
The company may have benefited from higher political ad spending in the fourth quarter, driven by the U.S. presidential election. Meta, the parent company of Facebook, also reported an ad revenue boost from political campaigns.
However, concerns over the ad market persist, especially after Meta’s subdued first-quarter forecast. Economic uncertainty and potential global tariffs could further dampen digital ad revenue.
Cloud Business and AI Outlook
“Real-time news” indicates that expectations for Google Cloud remain high, especially after the segment achieved its fastest growth in two years in the September quarter, driven by AI-related investments.
Alphabet’s stock has gained about 7% in 2025 following a 35% rally last year, reflecting strong investor confidence in its AI strategy. However, recent concerns about a potential slowdown have emerged after Microsoft’s Azure reported weaker-than-expected cloud computing growth in the December quarter.
“We need to see if Google faces the same issue as Microsoft, where AI drove growth but core cloud services underperformed,” said Gil Luria, an analyst at D.A. Davidson.
Alphabet’s earnings report will be closely watched as investors assess whether the company’s AI investments are sustainable and whether its cloud and advertising businesses can maintain momentum. The outcome will determine whether Alphabet can continue its strong stock performance or face further pressure in the competitive AI
