Alphabet’s Stock Takes a Hit: Cloud Struggles, Rising Costs, and China’s Antitrust Probe

Written by Lucas Shum

February 5, 2025

On Wednesday morning, Alphabet Inc. (GOOG) experienced an 8% drop in its stock price following the release of its fourth-quarter earnings report. Despite beating earnings per share (EPS) expectations and coming in roughly even on revenue, there were concerns over the company’s performance in key areas, including its cloud segment and a significant increase in capital expenditures.

Alphabet’s earnings report for Q4 revealed that while the tech giant posted earnings above Wall Street’s expectations, revenue growth did not exceed analysts’ forecasts. The company’s cloud division, which has been a key focus for future growth, underperformed. Alphabet had hoped to show stronger momentum in this segment, which is seen as vital for maintaining its competitive edge against rivals such as Amazon Web Services (AWS) and Microsoft Azure. The cloud revenue shortfall raised questions about the company’s ability to scale and capture a larger share of the cloud computing market.

Another major factor contributing to the drop in Alphabet’s stock was the announcement of a substantial increase in its capital expenditures for the upcoming year. The company revealed that its planned capital expenditures would rise from $57.9 billion in 2024 to an expected $75 billion in 2025, representing a significant 30% increase. This expansion of capital spending raised concerns among investors, particularly about the company’s ability to manage such a hefty investment, especially amid a challenging economic environment. Investors typically view significant capital expenditure increases with caution, as they can indicate either a forward-looking growth strategy or an overextension of resources.

In addition to these financial factors, Alphabet’s stock price was further pressured by geopolitical concerns. On Tuesday, the Chinese government announced it was launching an antitrust investigation into Google, a move seen by many as retaliation against the U.S. for the ongoing trade tensions between the two countries. The timing of this announcement, which came just after Alphabet’s earnings report, added another layer of uncertainty for investors. The investigation, which is reportedly connected to Google’s market practices and its role in the digital advertising space, could lead to significant regulatory hurdles in one of the world’s largest and most important markets.

This antitrust probe by China follows months of escalating trade tensions between the U.S. and China, particularly after President Trump’s decision to impose a 10% tariff on goods made in China. With both the earnings report and the looming antitrust investigation weighing heavily on the stock, investors reacted swiftly, leading to the sharp drop in Alphabet’s stock price on Wednesday morning.

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