By Deborah Mary Sophia and Zaheer Kachwala
(Reuters) – The alphabet will face the scrutiny of investors over its huge expenditure on AI when it reports on Tuesday, as revenue growth in the Google parent is likely to slow down in the holiday quarter due to slowdown in its advertising and cloud businesses .
Like other US technology heavyweight, the alphabet faces a new scrutiny of its capital expenditure after initiating Chinese Deepseek last month launching low -cost AI models that threaten to push the AI industry into prices war.
The alphabet capital expenditure is estimated to be $ 50 billion for last year, according to LSEG, with more in progress for 2025 to support its cloud expansion and search features driven by AI, including abstracts, which are essential to protect Its market share and attracts more revenue.
Microsoft and Meta Platforms executives defended their Hefty AI spending plans last week, saying they are essential to stay ahead in the new field.
Meanwhile, Google Cloud Growth is expected to slow down in the fourth quarter in the midst of high expectations for the segment.
“Although growth (cloud unit) rate is expected to slow down, high investment is expected to continue, but so far efficiency gains have kept profit vibrant. Maintaining this balancing action will be critical and investors will want to see evidence of this, “Said Susannah Street, Head of Silver and Markets, Hargreaves Lansdown.
Revenue from Google Search and other business is expected to have risen by 11.2% in the fourth quarter, according to Alpha's visible estimates, compared to a 12.2% increase in the third quarter.
Overall, alphabet revenue is expected to grow 11.9% to $ 96.6 billion, slower than the third quarter, according to estimates produced by LSEG.
The company – whose search and YouTube services are used by more than 2 billion people every month – is also trying to retain its most prominent share in the search advertising market in the midst of a growing competition by the E -Trading Commerce Amazon. com and social media apps like Tiktok.
Advanced political advertisement expenditure around the US presidential elections may have assisted Google in the fourth quarter, after Meta, the owner of a Facebook, also marked a similar advertisement revenue boost.
Still, Meta's first quarter forecast has triggered concerns about the advertisement market forecast as economic uncertainty increases with the horizon threatened from global tariffs.
The focus of Cloud
Expectations are high for Google's cloud business after the segment identified its fastest growth in two years in September's quarter thanks to AI spending by businesses.