Alphabet (GOOG, GOOGL) is set to release its results for the fourth quarter after the bell on Tuesday, kicking off a second week of earnings for US tech giants as Wall Street looks to see how the search behemoth will respond to the threat of Chinese startup DeepSeek’s AI models.
The Google parent is also expected to offer updates on its efforts to turn massive AI investments into new revenue streams and the broader performance of the massive digital ad market.
Advertising rival Meta (META) reported earnings last week, easily beating Wall Street’s expectations on the top and bottom lines, but declined to provide full-year guidance. Meta, like Alphabet, is investing heavily in its AI efforts as it seeks to use the technology to improve ad sales and user engagement.
Google, and US tech companies more generally, are still reeling from the breakout success of DeepSeek’s V3 and R1 models. Purportedly developed for a fraction of the cost of Google’s Gemini and OpenAI’s ChatGPT, DeepSeek’s efficiency raises questions about whether Silicon Valley is overinvesting in AI hardware.
Alphabet is expected to report earnings per share of $2.13 on revenue of $96.6 billion for the quarter, up from $1.64 per share and $86.3 billion for the same period last year.
Advertising revenue is expected to top out at $71.7 billion, up from $65.5 billion a year ago, while Google Cloud revenue is set to hit $12.1 billion compared to the 9.1 billion the company saw last year.
Cloud growth is an important metric for Alphabet as it seeks to gain market share from rivals Amazon (AMZN) and Microsoft (MSFT). Microsoft’s cloud revenue jumped 21% year over year during its most recent quarter, climbing to $40 billion. Still, that was shy of Wall Street’s expectations of $41.1 billion, sending shares of the Windows maker lower.
“We believe that cloud growth should keep a high-20s to low-30s percentage growth pace through 2026, driven by greater contribution from artificial intelligence workloads as capacity expands, as well as the December launch of Gemini 2.0,” said Angelo Zino, equity analyst at CFRA Research, in a note.
Google, like Meta, is awaiting the outcome of Trump’s advocacy for TikTok, the short-form video app that was supposed to shut down its US operations last month but has continued to run as the president seeks a workaround to avoid an outright ban.
Google also continues to face regulatory risks. Late last year, Google appealed a ruling after the courts found that the company abused its monopoly power over the search business. One potential remedy, suggested by government lawyers, is a breakup of the company. The market has largely shrugged off immediate concerns of a drastic shake-up, however.
