Alphabet Set to Release Q4 Earnings Amid DeepSeek Threat and Regulatory Scrutiny

Alphabet (GOOG, GOOGL) is poised to release its fourth-quarter earnings report after the market closes on Tuesday. The results will shed light on the company's response to the growing threat from Chinese AI startup DeepSeek's models. Investors will also be looking for updates on Alphabet's AI investment strategy and the performance of the digital advertising market.

AI Competition and Revenue Streams

Alphabet faces intense competition in the AI space, particularly from DeepSeek, whose models reportedly achieve similar results at a fraction of the cost. This raises questions about potential overinvestment in AI hardware in Silicon Valley.

Alphabet is expected to report earnings per share of $2.13 on revenue of $96.6 billion for the quarter. Advertising revenue is projected to reach $71.7 billion, while Google Cloud revenue is estimated at $12.1 billion. Cloud growth is a key area of focus for Alphabet as it seeks market share from competitors Amazon (AMZN) and Microsoft (MSFT).

Cloud Growth and Regulatory Concerns

Microsoft recently reported a 21% year-over-year increase in its cloud revenue, surpassing $40 billion. However, this fell short of Wall Street expectations, causing its shares to decline.

Analysts expect Alphabet's cloud growth to continue at a pace of 20-30% through 2026, driven by AI workloads and the launch of Gemini 2.0.

Alphabet also faces regulatory risks, including an ongoing appeal of a court ruling that found the company abused its search monopoly. Potential remedies include a company breakup, although the market has largely dismissed concerns of a drastic shake-up.

Political Implications and Stock Performance

Alphabet CEO Sundar Pichai's attendance at President Trump's inauguration has raised questions about the industry's relationship with the Trump administration. Investors will monitor potential impacts of Trump's policies on Silicon Valley and their implications for Google's court cases.

Despite regulatory concerns, Alphabet shares have risen 41% over the past 12 months, outperforming Amazon (39%) and Microsoft (2%).