Shares of Alphabet (GOOG 1.16%) (GOOGL 1.32%) were moving lower Wednesday morning after the tech giant reported fourth-quarter revenue that was slightly below estimates and its slowest top-line growth of 2024. Investors were also disappointed by the slowing growth of its cloud computing business.
As of 11:15 a.m. ET, the stock was down by 8.1%.
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Alphabet comes up short
Overall revenue rose 12% to $96.5 billion in Q4, slightly below analysts' consensus estimate of $96.67 billion. That revenue growth was balanced with search revenue up 12.5% to $54 billion, YouTube up 13.8% to $10.5 billion, and its third-party Google Network ad revenue continuing to decline.
Revenue from Google Cloud was up 30% to $12 billion, though that was a bit below the $12.2 billion that analysts had expected.
Wall Street also appears skeptical of the company's plans to increase capital expenditures from $52.5 billion in 2024 to $75 billion in 2025 to pursue opportunities in artificial intelligence and other areas.
Further down the income statement, Alphabet continued to deliver margin expansion. Its operating margin improved from 27% to 32%, and earnings per share rose from $1.64 to $2.15, beating the consensus expectation of $2.13.
"Q4 was a strong quarter driven by our leadership in AI and momentum across the business," said CEO Sundar Pichai in the earnings release.
What's next for Alphabet
A 7% sell-off might seem like an excessive response to a slight earnings miss, but Alphabet stock had run higher ahead of the earnings report, and also jumped after the company announced it had hit a quantum computing milestone in December.
Alphabet doesn't give guidance, so investors are judging its top-line miss more harshly than they otherwise might. Overall, there weren't any red flags in the report, and profits from Google Cloud continued to ramp up to more than $2 billion in the quarter.
The tech giant still looks well positioned for long-term growth.
