Photo Credit: Jonathan Sautter from Pixabay
 

This week, Alphabet aka Google (Nasdaq: GOOG) reported a mixed fourth quarter. It missed the revenue estimate as the cloud business growth was less than the previous quarter.
 

Alphabet’s Financials

Alphabet’s fourth quarter revenue grew 12% to $96.47 billion, slightly behind analyst estimates of $96.56 billion. Net income grew 28% to $26.54 billion or $2.15 per share, beating analyst estimates of $2.12 per share. 

By segment, revenues from Google Services that includes Search, Advertising, Android, Chrome, Hardware, Google Maps, Google Play, and YouTube ads grew 10% to $84.1 billion. Advertising revenue grew 10.5% to $72.4 billion, driven by strength across Google Search and YouTube ads. Google Search revenue grew 13% to $54 billion, led by the financial services vertical followed by retail. YouTube ad revenue grew 14% to $10.5 billion driven by strong spend on US election advertising. Network advertising revenue of $8 billion was down 4%. Subscription platforms and device revenues increased 8% to $11.6 billion.

Google Cloud revenues grew 30% to $12 billion ahead of analyst estimates of $10.88 billion. Third quarter cloud revenue growth was 35%. Revenues from Other Bets fell 39% to $400 million.

For the full year 2024, revenue grew by 14% to $350 billion. Combined revenues of YouTube and cloud ended the year at $110 billion annual run rate. Total income grew 33% to $112 billion. 

The company spent $15 billion in share repurchases and $2.4 billion in dividend payments during the quarter. It returned nearly $70 billion to shareholders in 2024. 
 

Google’s AI Strategy

During the earnings call, CEO Sundar Pichai said that 4.4 million developers are using Gemini models, double the number from six months ago. It has seven products and platforms with over 2 billion users, all of which are using Gemini.

He said they will continue to invest in their cloud business to address the increase in customer demand. Its cloud customers consume more than eight times the compute capacity for training and inferencing compared to 18 months ago. It would be spending $75 billion on Capex this year, ahead of the $59.73 billion analyst estimate.
 

Gemini 2.0 – Google’s Agentic AI

In December, the company launched Gemini 2.0, an AI model built for the agentic era. Its advances in multimodality and native tool use enable building new AI agents closer to its vision of a universal assistant. 

Gemini 2.0 is billed based on tokens or each unit of data that the model processes. The suite of models includes 2.0 Flash and 2.0 Flash-Lite. Gemini Flash costs developers 10 cents per million tokens for text, image and video inputs, while Flash-Lite costs 0.75 cent per million tokens.

Google is not the only company working on Agentic AI. OpenAI’s agentic AI, primarily accessed through their “Operator” feature, is available through the ChatGPT Pro subscription, which costs $200 per month. Salesforce’s Agentforce charges $2 per conversation.

Its stock is trading at $192.45 with a market capitalization of $2.33 trillion. It hit a 52-week high of $208.7 early this week and a 52-week low of $131.55 in March last year.

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