Dive Brief:
- Google parent Alphabet expects to invest about $75 billion in capital expenditures this year as the tech giant expands its artificial intelligence efforts, CFO Anat Ashkenazi said Tuesday.
- “We expect to increase our investments in capital expenditure for technical infrastructure, primarily for servers, followed by data centers and networking,” the finance chief said during an earnings call.
- The company also anticipates headcount growth in 2025 in key investment areas such as AI and cloud, she added.
Dive Insight:
Big tech companies continue to invest heavily in AI even as the trend is being closely watched by nervous investors looking for signs that such expenditures are paying off.
The scrutiny is only expected to intensify in the wake of the recent sudden rise of Chinese tech startup DeepSeek, which has attracted global attention after releasing an open-source AI model that it claims was built at a low cost compared with U.S. rivals like ChatGPT.
Microsoft expects to spend roughly $80 billion on AI-enabled data centers to train large language models and deploy AI and cloud-based applications during its current fiscal year. And Meta anticipates its 2025 capex to be in the range of $60 billion to $65 billion to support both its generative AI efforts and core business.
Alphabet’s planned $75 billion in capex for the coming year is well above the consensus estimate of $57.9 billion and represents a 43% year-over-year increase, according to a report by Futurum Group analysts.
“While Alphabet remains at the forefront of AI integration, mounting competition from firms like DeepSeek and its ongoing infrastructure investments bring renewed scrutiny on capital allocation and near-term returns,” the analysts wrote.
Consolidated Alphabet revenues in the fourth quarter of fiscal 2024 increased 12% year over year to $96.5 billion, according to results released Tuesday.
Google Cloud revenues increased 30% to $12 billion, while Google Services revenues increased 10% to $84.1 billion, reflecting momentum across Google Search and YouTube ads, the company said.
Alphabet’s total capex in the quarter was $14 billion, primarily reflecting investments in technical infrastructure such as servers and data centers, Ashkenazi told investors.
“We're pleased with the momentum we're seeing in AI innovation and monetization,” she said. “We've been using AI to improve the performance of our ads business for well over a decade, and Cloud is generating billions in annual revenue from AI infrastructure and generative AI solutions.”
The company’s stock fell more than 7% on Wednesday despite its revenue increase, which was short of analysts’ expectations.
Futurum’s analysts said Alphabet’s deepening AI adoption and cloud capacity constraints support its elevated capex strategy, but investor confidence “will hinge on efficient execution and clear ROI.” The company will have to “walk a fine line between rapid innovation and financial discipline,” they wrote.
Analysts at Morningstar indicated in a client’s note that AI monetization across Alphabet’s businesses is within reach.
“While 2025's $75 billion capital expenditure forecast exceeded our expectations, we believe the firm can actually monetize this investment,” they wrote in a client’s note.
