Alphabet (GOOG) and the Rise of Chinese AI: Earnings Preview
Alphabet, Inc. (GOOG) is poised to release its fourth-quarter earnings after the bell on Tuesday. Investors eagerly await how the tech giant will navigate the rising threat from Chinese AI startup DeepSeek and unlock revenue opportunities from its massive AI investments.
DeepSeek's V3 and R1 models have disrupted the industry, raising concerns over potential overinvestment in AI hardware in Silicon Valley. Alphabet is projected to report earnings per share of $2.13 on revenue of $96.6 billion, a significant increase from last year's $1.64 per share and $86.3 billion.
Advertising revenue is forecast to reach $71.7 billion, up from $65.5 billion, while Google Cloud revenue is estimated at $12.1 billion, surpassing last year's $9.1 billion. Cloud growth is crucial for Alphabet as it competes with Amazon (AMZN) and Microsoft (MSFT). Microsoft's recent cloud revenue growth of 21% fell short of Wall Street expectations.
"Cloud growth is anticipated to remain in the high-20s to low-30s percentage range until 2026," said Angelo Zino of CFRA Research. "AI workloads, Gemini 2.0, and capacity expansion will drive this growth."
Google faces legal challenges and regulatory scrutiny. A recent court ruling found the company abused its search monopoly, potentially leading to a breakup. However, the market has largely dismissed these concerns.
CEO Sundar Pichai's attendance at President Trump's inauguration suggests an industry-wide shift towards a more amicable relationship with the administration. Investors will monitor Trump's impact on Silicon Valley and Google's ongoing court troubles.
Despite these challenges, Alphabet shares have outperformed Amazon and Microsoft in the past 12 months, rising 41%.