Alphabet (GOOGL), Google’s parent company, is gearing up for investor scrutiny about its massive AI spending as it reports fourth-quarter earnings on Tuesday after the market closes. Investors are concerned about the company’s huge AI investments, especially after cheaper AI models emerged recently.
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The tech giant reportedly spent over $50 billion on AI last year and plans to invest even more in 2025 to boost its cloud services and AI-driven search features. However, with revenue growth slowing in key businesses like advertising and cloud, investors are worried about the sustainability of these huge investments. They also want clarity on how this spending will deliver tangible returns and drive future growth.
Further, the launch of a low-cost AI model by Chinese startup DeepSeek has increased competitive pressures. This has increased concerns about a potential price war in the AI sector, which could impact Alphabet’s market share and profitability.
Other AI Companies Face Growing Concerns As Well
Other AI companies, such as Meta Platforms (META) and Microsoft (MSFT), have also faced investor concerns about their large AI spending. In response, Meta CEO Mark Zuckerberg acknowledged the impact of cheaper AI models but highlighted the long-term benefits of AI infrastructure investments. Meanwhile, Microsoft CEO Satya Nadella pointed out that as AI becomes more affordable and accessible, its usage will increase significantly, thereby increasing its demand.
When Alphabet releases its earnings today, investors are likely to examine how its AI investments stack up against Meta and MSFT.
Analysts Expect GOOGL’s Q4 Revenues and Earnings to Rise
Ahead of the company’s Q4 earnings release, analysts expect GOOGLE to post revenue of $96.67 billion, up from $86.16 billion in the year-ago quarter.
Further, they expect GOOGL to report earnings of $2.13 per share, compared with earnings of $1.64 in the prior-year quarter.
Is GOOGL a Buy, Hold, or Sell?
Turning to Wall Street, GOOGL has a Moderate Buy consensus rating based on 21 Buys and eight Holds assigned in the last three months. At $219, the average Alphabet price target implies 8.83% upside potential. Shares of the company have gained 26.67% in the past six months.
