The Two Reasons Alphabet Stock Is Sinking After Earnings
Alphabet reported an earnings beat and strong cloud growth, but the Google stock is spiraling Wednesday. Here's why.


Shares of Google's parent company Alphabet (GOOGL) slumped out of the gate Wednesday after the search engine giant reported mixed results for its fourth quarter and issued an outlook for capital expenditures that was way ahead of expectations.
In the three months ending December 31, Alphabet's revenue increased 11.8% year over year to $96.5 billion. Its earnings per share (EPS) rose 31.1% from the year-ago period to $2.15.
Alphabet's revenue growth was led by its Google Cloud unit, which achieved a 30% increase in sales to $12 billion. Meanwhile, total advertising revenue was up 10.6% year over year to $72.5 billion, including 13.8% growth to $10.5 billion at YouTube.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"Our strong performance in Q4 was driven by our leadership in AI [artificial intelligence] and momentum across the business. We are building, testing, and launching products and models faster than ever while making significant progress in compute and driving efficiencies," said Alphabet CEO Sundar Pichai in a statement.
Pichai added that advances in AI and search are increasing user engagement and that the company's solid results were driven by its AI-powered cloud portfolio and YouTube. "Together, Cloud and YouTube exited 2024 at an annual revenue run rate of $110 billion," he pointed out.
The results were mixed compared with analysts' expectations. Wall Street was anticipating revenue of $96.6 billion and earnings of $2.13 per share, according to CNBC.
In addition to the top-line miss, accelerated capex spending is weighing on the Magnificent 7 stock Wednesday. Indeed, Alphabet unveiled plans to spend approximately $75 billion in capital expenditures in 2025. This capex figure came in well ahead of analysts' expectations for $58.8 billion in spending.
Is Alphabet stock a buy, sell or hold?
Alphabet has been a market-beating machine for years. In the past 12 months alone, shares have generated a 45% total return (price change plus dividends) through the February 4 close vs the S&P 500's 23% gain. And Wall Street is bullish on the communication services stock.
According to S&P Global Market Intelligence, the average analyst target price for GOOGL stock is $215.44, representing implied upside of roughly 14% to current levels. Additionally, the consensus recommendation is a Buy.
Financial services firm Wedbush is one of those with an Outperform (equivalent to a Buy) and $220 price target on the blue chip stock.
Despite the post-earnings selloff, Wedbush analyst Scott Devitt says he continues "to see a favorable risk/reward for Alphabet and thinks there is a case for multiple expansion in the coming quarters as investors gain more comfort related to infrastructure spending, regulatory risk, and the impact of generative AI on Google Search."
Related Content
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.
-
Stock Market Today: Nasdaq Hits a New High as Nvidia Soars
A big day for Nvidia boosted the Nasdaq, but bank stocks created headwinds for the S&P 500.
-
June CPI Signals Tariff Impact: What the Experts Say
The June CPI report shows that inflation is accelerating, but at a pace that's in line with economists' expectations.
-
I'm a Financial Planner: Here Are Five Smart Moves for DIY Investors
You'll go further as a DIY investor with a solid game plan. Here are five tips to help you put together a strategy you can rely on over the years to come.
-
Neglecting Car Maintenance Could Cost You More Than a Repair, Especially in the Summer
Worn, underinflated tires and other degraded car parts can fail in extreme heat, causing accidents. If your employer is ignoring needed repairs on company cars, there's something employees can do.
-
'Drivers License': A Wealth Strategist Helps Gen Z Hit the Road
From student loan debt to a changing job market, this generation has some potholes to navigate. But with those challenges come opportunities.
-
Stock Market Today: Markets Chop Up More Trump Threats
Stocks are grinding to new highs on light summer volume, and bitcoin is only getting bigger.
-
If You'd Put $1,000 Into Procter & Gamble Stock 20 Years Ago, Here's What You'd Have Today
Procter & Gamble stock is a dependable dividend grower, but a disappointing long-term holding.
-
Financial Pros Provide a Beginner's Guide to Building Wealth in 10 Years
Building wealth over 10 years requires understanding your current financial situation, budgeting effectively, eliminating high-interest debt and increasing both your income and financial literacy.