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Alphabet Faces Investor Scrutiny Over AI Spending Amid Slowing Cloud Growth

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Alphabet is set to report earnings on Tuesday, with investors closely watching its substantial AI investments as revenue growth slows due to weaker advertising and cloud performance. The Google parent’s capital expenditure for 2024 is estimated at $50 billion, with further increases expected in 2025 to support cloud expansion and AI-driven search enhancements.

The rise of low-cost AI models, such as those from Chinese startup DeepSeek, has intensified concerns over a potential AI price war. Alphabet, like Microsoft and Meta, is defending its high AI spending, arguing it is necessary to maintain a competitive edge.

Google Cloud, a key growth driver, is anticipated to show a slowdown in the fourth quarter. The segment is expected to report a 32% revenue increase, compared to 35% in the previous quarter. This performance will be scrutinized following Microsoft’s recent results, where Azure’s core cloud services underperformed despite AI-driven gains. Analysts are keen to see whether Google experiences a similar trend.

Alphabet’s Search and Other revenue is projected to have grown 11.2% in Q4, slightly lower than the 12.2% increase in Q3. The company continues to face rising competition from Amazon and TikTok in the digital ad space. However, higher political ad spending linked to the upcoming U.S. Presidential elections may have provided a temporary boost.

Overall, Alphabet’s revenue is estimated to have grown 11.9% year-over-year to $96.6 billion, reflecting a slowdown from the previous quarter. Despite a 7% rise in its stock price this year, concerns about a potential deceleration in its cloud segment have mounted, especially after Microsoft’s disappointing cloud results.

Investors will be closely watching Alphabet’s ability to balance AI investments with profitability, as well as its strategy to maintain leadership in both the search and cloud computing markets.

 

Waymo to Expand Autonomous Driving Tests to Over 10 New Cities

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Alphabet’s self-driving unit, Waymo, announced plans on Wednesday to expand its autonomous driving technology testing to over 10 new cities in 2025. Following successful trials of its Waymo Driver in various locations, the company is now preparing to test its technology in additional urban environments, including San Diego and Las Vegas, among other cities to be revealed later.

Waymo has already conducted trials in regions such as Truckee, Michigan’s Upper Peninsula, Upstate New York, and Tokyo, and reports that its technology has successfully adapted to these diverse settings. The new expansion will involve a limited fleet of vehicles, with trained human specialists behind the wheel at all times. Testing will begin with manual driving through the most complex areas of each city, such as city centers and freeways.

Initially, fewer than 10 vehicles will be deployed to each location, where they will be manually driven for a few months to evaluate the technology’s performance. This marks a strategic move as Waymo aims to strengthen its autonomous ride-hailing services, having already expanded to Miami, Florida, in December. The company is under close scrutiny from safety regulators, following several incidents involving autonomous driving technology.

In October, Waymo closed a $5.6 billion funding round led by its parent company, Google, as part of its efforts to scale its autonomous services in an increasingly competitive market.

 

EU Set to Reevaluate Tech Investigations into Apple, Google, Meta

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The European Commission is currently reassessing its ongoing investigations into major tech companies, including Apple, Meta, and Google’s parent company Alphabet, according to a report by the Financial Times. This reevaluation could result in significant changes to the scope of these probes, with potential reductions or adjustments to the focus of the investigations. The review will encompass all cases initiated since the implementation of the European Union’s Digital Markets Act (DMA) in March 2024, a move that underscores the EU’s commitment to regulating the power of large tech platforms.

The DMA is one of the EU’s most stringent regulatory measures aimed at curbing the market dominance of tech giants. It outlines a set of rules that govern what these companies can and cannot do, with a particular emphasis on promoting fair competition and protecting consumers. The legislation carries the threat of hefty fines—up to 10 percent of a company’s annual revenue—for violations, making it one of the most impactful tools in Europe’s regulatory arsenal.

During the reassessment process, all decisions regarding fines or penalties will be temporarily suspended, but technical work on the ongoing investigations will continue, ensuring that the EU remains proactive in addressing potential issues. This pause in decision-making reflects the commission’s careful approach to fine-tuning its regulatory efforts and ensuring that the final outcomes are well-founded and justified.

The reassessment of these high-profile investigations into Apple, Meta, and Google is likely to have significant implications for the future of tech regulation in Europe. With the DMA already a landmark piece of legislation, the outcomes of these reviews could set important precedents for how similar cases are handled in the future, both within the EU and globally. As these probes unfold, all eyes will be on how the EU strikes a balance between promoting innovation and ensuring fair competition in the rapidly evolving tech landscape.