Shares of Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) were moving lower Wednesday morning after the tech giant reported fourth-quarter revenue that was slightly below estimates and its slowest top-line growth of 2024. Investors were also disappointed by the slowing growth of its cloud computing business.
As of 11:15 a.m. ET, the stock was down by 8.1%.
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Alphabet comes up short
Overall revenue rose 12% to $96.5 billion in Q4, slightly below analysts' consensus estimate of $96.67 billion. That revenue growth was balanced with search revenue up 12.5% to $54 billion, YouTube up 13.8% to $10.5 billion, and its third-party Google Network ad revenue continuing to decline.
Revenue from Google Cloud was up 30% to $12 billion, though that was a bit below the $12.2 billion that analysts had expected.
Wall Street also appears skeptical of the company's plans to increase capital expenditures from $52.5 billion in 2024 to $75 billion in 2025 to pursue opportunities in artificial intelligence and other areas.
Further down the income statement, Alphabet continued to deliver margin expansion. Its operating margin improved from 27% to 32%, and earnings per share rose from $1.64 to $2.15, beating the consensus expectation of $2.13.
"Q4 was a strong quarter driven by our leadership in AI and momentum across the business," said CEO Sundar Pichai in the earnings release.
What's next for Alphabet
A 7% sell-off might seem like an excessive response to a slight earnings miss, but Alphabet stock had run higher ahead of the earnings report, and also jumped after the company announced it had hit a quantum computing milestone in December.
Alphabet doesn't give guidance, so investors are judging its top-line miss more harshly than they otherwise might. Overall, there weren't any red flags in the report, and profits from Google Cloud continued to ramp up to more than $2 billion in the quarter.
The tech giant still looks well positioned for long-term growth.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
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