Alphabet Plummets Post-Earnings on Cloud Weakness
[Ticker: GOOG]
Alphabet (GOOGL) experienced a significant market downturn after its disappointing Q4 revenue report. Pre-market trading on Wednesday saw an 8% loss, attributed to weaker-than-expected cloud service revenues and a slowdown in business growth compared to the previous quarter.
Cloud Constraints and Excessive Capital Expenditure
CFO Anat Ashkenazi cited "capacity constrained" cloud operations as the primary factor behind the earnings miss, despite strong demand. However, investors remain skeptical and have sold off shares. Concerns also arose regarding the company's $75 billion capital expenditure plans for 2025, significantly higher than analysts' estimates of $60 billion.
Mixed Signals from Wall Street
Industry analysts have expressed mixed reactions to Alphabet's performance:
* DA Davidson (Neutral): Maintains $200 price target, acknowledging AI integration benefits but highlighting concerns over Google Cloud growth and capacity constraints.
* Pivotal Research Group (Buy): Reiterates $225 price target, citing strong search and YouTube revenues but expressing caution over slower cloud growth and higher capital expenditures.
* JP Morgan (Overweight): Lowers price target to $220 from $232, pointing to uncertainties regarding 2025 capital expenditures, cloud revenue trajectory, and margin expansion potential.
Growth in Search and YouTube
Despite the cloud concerns, Alphabet's search business grew 13% in the quarter, and YouTube ad sales saw a 13.8% increase. These positive indicators offer some hope amidst the challenges facing its cloud segment.
Market Reaction and Outlook
Analysts are expected to adjust sales and profit estimates in light of the disappointing cloud performance and elevated capital expenditure guidance. The stock's post-earnings decline reflects investor concerns over the sustainability of Alphabet's growth amid a competitive market environment.