Google's Digital Ad Sales Surge Despite AI Worries
SAN FRANCISCO (AP) — Google's digital ad sales continued to grow at a healthy clip during the holiday season, but that wasn't enough to offset investors' worries about whether its big bet on artificial intelligence will be lucrative as once envisioned.
Earnings Beat Forecasts, Revenue Growth Slower Than Expected
The October-December results released Tuesday by Google parent Alphabet Inc. showed the company is continuing to reap even more profits from its dominant search engine and other peripheral services.
Alphabet earned $26.5 billion, or $2.15 per share, during last year’s final quarter, a 28% increase from the same time during the previous year.
Revenue Growth Falls Short of Projections
Revenue rose 12% from the previous year to $96.5 billion. The earnings eclipsed analyst forecasts of $2.13 per share, but the revenue fell slightly below projections, according to FactSet Research.
Google Cloud Division Lags Behind Expectations
More importantly, revenue growth in the Google Cloud division tethered to the AI craze wasn't as robust as had been anticipated.
Stock Price Plunges on Disappointing AI Growth
That letdown contributed to a more than 8% drop in Alphabet's stock price after the numbers came out. The downturn reversed a recent rally that had elevated Alphabet's shares to a new all-time high earlier Tuesday during the regular trading session.
Analysts Weigh In on AI Concerns
“The reaction underscores concerns that rivals like Microsoft, with its OpenAI partnership, are better positioned to convert AI hype into revenue,” said Investing.com analyst Jesse Cohen.
Google's Ad Sales Show Promise in AI-Generated Content
But the AI-generated overviews that Google has been increasingly displaying in at the top of its search results appeared to be helping to bring in more advertising. Google's ad sales climbed 11% from the previous year to $72.5 billion to exceed analyst estimates.
CeOs Weigh In on AI's Potential
“The early signs suggest that AI is working for Google,” said Jim Yu, CEO of BrightEdge, which helps websites rank higher in search results. "What it does for Google is keep more of the digital experience happening within its search engine. And by the time they send someone to another site, shoppers and readers have already gotten further down their journey. So that visitor is worth a lot more to an advertiser.”
Google's AI Expansion: A Multi-Billion Dollar Bet
But Google also has spending billions of dollars on its AI expansion, a huge investment that some investors are questioning after the Chinese startup DeepSeek found an effective way to deploy similar technology at a fraction of the cost.
Alphabet CEO Reassures Investors on AI's Potential
Alphabet CEO Sundar Pichai sought to reassure investors all that spending will pay off during a Tuesday conference call by emphasizing the way AI is helping to boost Google's fortunes by attracting more search traffic and making other services more popular.
Regulatory Concerns Weigh on Google
The uncertainty over AI isn't the only worry hanging over Google.
The Mountain View, California, company also is facing a regulatory crackdown in the U.S., by far its most lucrative market, raising the specter that its revenue could be undercut.
Google's Search Engine Declared Illegal Monopoly
A federal judge last year declared Google’s search engine is an illegal monopoly — a decision that has opened the door for regulators to propose forcing the company to sell its Chrome web browser.
Court Hearings Scheduled for April
Court hearings on how Google should be punished for its abuses in the search market are scheduled to begin in April, with a decision anticipated before autumn.
Antitrust Trials Loom Large Over Google
Besides the legal assault on its search engine, Google also has been ordered to tear down the barriers protecting its Play Store for Android smartphone apps. That ruling is currently on hold while Google appeals.