Google's rising holiday's season ad sales aren't enough to ease worries about AI letdown
The October-December results released Tuesday by Google parent Alphabet Inc. showed the company is continuing to reap even more profits from its dominant search engine and other peripheral services.
Alphabet earned $26.5 billion, or $2.15 per share, during last year's final quarter, a 28% increase from the same time during the previous year. Revenue rose 12% from the previous year to $96.5 billion. The earnings eclipsed analyst forecasts of $2.13 per share, but the revenue fell slightly below projections, according to FactSet Research.
More importantly, revenue growth in the Google Cloud division tethered to the AI craze wasn't as robust as had been anticipated.
That letdown contributed to a more than 8% drop in Alphabet's stock price after the numbers came out. The downturn reversed a recent rally that had elevated Alphabet's shares to a new all-time high earlier Tuesday during the regular trading session.
'The reaction underscores concerns that rivals like Microsoft, with its OpenAI partnership, are better positioned to convert AI hype into revenue,' said Investing.com analyst Jesse Cohen.
But the AI-generated overviews that Google has been increasingly displaying in at the top of its search results appeared to be helping to bring in more advertising. Google's ad sales climbed 11% from the previous year to $72.5 billion to exceed analyst estimates.
'The early signs suggest that AI is working for Google,' said Jim Yu, CEO of BrightEdge, which helps websites rank higher in search results. 'What it does for Google is keep more of the digital experience happening within its search engine. And by the time they send someone to another site, shoppers and readers have already gotten further down their journey. So that visitor is worth a lot more to an advertiser.'
But Google also has spending billions of dollars on its AI expansion, a huge investment that some investors are questioning after t he Chinese startup DeepSeek found an effective way to deploy similar technology at a fraction of the cost. Alphabet is expecting its ongoing AI expansion to increase its capital from about $60 billion last year to $75 billion this year.
Alphabet CEO Sundar Pichai sought to reassure investors all that spending will pay off during a Tuesday conference call by emphasizing the way AI is helping to boost Google's fortunes by attracting more search traffic and making other services more popular.
'The company is in a great rhythm and cadence, building, testing and launching products faster than ever before,' Pichai said.
Before the fourth-quarter results came out, Google made a change that in its AI principles signaling it may be more open to selling the technology in areas that it had previously indicated it would avoid. The revised principles removed previous commitments not to deploy AI in weaponry or surveillance that had been in place since 2018. Pichai didn't address the change during Tuesday's conference call and Google didn't immediately respond to a request for comment.
The uncertainty over AI isn't the only worry hanging over Google.
The Mountain View, California, company also is facing a regulatory crackdown in the U.S., by far its most lucrative market, raising the specter that its revenue could be undercut.
After weighing the evidence presented during a high-profile trial, a federal judge last year declared Google's search engine is an illegal monopoly — a decision that has opened the door for regulators to propose forcing the company to sell its Chrome web browser.
Court hearings on how Google should be punished for its abuses in the search market are scheduled to begin in April, with a decision anticipated before autumn.
Besides the legal assault on its search engine, Google also has been ordered to tear down the barriers protecting its Play Store for Android smartphone apps. That ruling is currently on hold while Google appeals. Google is also awaiting a ruling in antitrust trial in Virginia revolving around the technology underlying its digital ad network.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Epoch Times
a few seconds ago
- Epoch Times
China Hits EU Banks Over Bloc's Russian Sanctions Package
Beijing targeted two Lithuanian banks on Wednesday in retaliation for the European Union's latest Russian sanctions that affected two rural Chinese banks near the China-Russia border. In an order published in state media Xinhua, the Chinese Ministry of Commerce (MOC) said it's adding Lithuania-based UAB Urbo Bankas and AB Mano Bankas to its list of sanctioned entities under the regime's Anti-Foreign Sanctions Law.
New York Post
29 minutes ago
- New York Post
Twins owners halt sale of team in shocking move to keep club in the family
The Minnesota Twins are no longer for sale, executive chair Joe Pohlad announced Wednesday on behalf of his family. After exploring a variety of options since publicizing the sale 10 months ago, the Pohlad family will remain the principal owner of the club and add new investors instead. Carl Pohlad, a banking magnate and the late grandfather of Joe Pohlad, bought the Twins in 1984 for $44 million. Advertisement 3 Minnesota Twins executive vice president Joe Pohlad announced the franchise are no longer so sale. AP 'For more than four decades, our family has had the privilege of owning the Minnesota Twins. This franchise has become part of our family story, as it has for our employees, our players, this community, and Twins fans everywhere,' Joe Pohlad said in his announcement. 'Over the past several months, we explored a wide range of potential investment and ownership opportunities. Our focus throughout has been on what's best for the long-term future of the Twins. We have been fully open to all possibilities.' Pohlad said the family was in the process of adding two 'significant' limited partnership groups to bring in fresh ideas, bolster critical partnerships and shape the long-term vision of the franchise that relocated to Minnesota in 1961 after originating as the Washington Senators. Advertisement Details about the new investors were being kept private until Major League Baseball approves the transactions, Pohlad said. Financial analysis earlier this year by Forbes valued the franchise at $1.5 billion, ranked 23rd in MLB. Sportico ($1.7 billion) and CNBC ($1.65 billion) pegged the Twins higher. The Pohlads hired Allen & Company, a New York-based investment bank, to direct the sale and keep inquiries confidential. Advertisement Multiple published reports identified Justin Ishbia, a part owner of the NBA's Phoenix Suns, as the front-runner. 3 This decision follows a near 10 month search for a potential buyer. AP But the Chicago White Sox announced last month that Ishbia was becoming a limited partner in a deal that provides a runway for him to become controlling owner. MLB Commissioner Rob Manfred acknowledged during the All-Star break, without naming him directly, that Ishbia's decision sidetracked the process. Advertisement 'There will be a transaction,' Manfred said. 'You just need to be patient while they rework.' The Twins are on track for their lowest attendance total in 16 seasons at Target Field, and an ownership-mandated payroll reduction last year in light of decreased regional television revenue, among other factors, has contributed to a dissatisfied customer base. The Twins traded 10 players off their roster leading up to the July 31 deadline, furthering the frustration. Word that the Pohlads are staying put certainly won't help the morale of Minnesota baseball fans, who've been waiting for another World Series title since 1991 and saw the investment in the roster plunge right after an American League Central title in 2023. The Twins won a playoff series then, too, their first in 21 years. 3 The organization will now remain within possession of the Pohlad family, even after trading away 10 players prior to this past trade deadline. 'We see and hear the passion from our partners, the community, and Twins fans. That passion inspires us,' Pohlad said. 'This ownership group is committed to building a winning team and culture for this region, one that Twins fans are proud to cheer for.' Speaking before Minnesota's game at the New York Yankees, manager Rocco Baldelli said he was happy to hear the Pohlad family would be staying involved. Advertisement 'One of the main reasons why I came to this organization in the first place was because of the Pohlads and the types of owners they are and how they treat people, so just start there,' Baldelli said. 'They've been a big part of my stay here and lot of the successes that we've had here as well.' The Twins began the season ranked 17th in player payroll at a little more than $142.8 million, but their trading spree last month lopped about $26 million from that figure. Shortstop Carlos Correa was sent to the Houston Astros in a pure salary dump that reunited the three-time All-Star with his original team, which inherited $70 million of the more than $103 million that remained on his contract. Advertisement Pohlad, in an interview with the Minnesota Star Tribune published immediately after the announcement, said he understands the bad feelings from the fans and looks forward to helping rebuild the brand and the roster. He said one of the investment groups is made up of Minnesotans and the other is a family based on the East Coast. Pohlad also said the teardown of the roster was not driven by a request from ownership to further cut costs. 'It certainly set us up for more flexibility, but they were primarily baseball decisions,' Pohlad told the Star Tribune.
Android Authority
29 minutes ago
- Android Authority
Hooray! ChatGPT Plus brings back legacy models alongside an updated GPT-5 experience
GPT-5 has faced a wave of criticism recently, both from everyday users and reviewers like our very own Calvin Wankhede here at Android Authority. Much of this feedback centered on the new model feeling more curt and having less personality. OpenAI responded quickly, addressing performance, personality, and usage limit issues — improving the overall experience significantly. Now, a fresh update makes things even better, at least for ChatGPT Plus subscribers. OpenAI has greatly expanded GPT-5's functionality by adding more modes: Auto, Fast, Thinking Mini, and Thinking Pro. Personally, I find GPT-5 better than most alternatives in certain scenarios, though your preference may vary. I tend to favor its concise, down-to-earth tone, which feels less sycophantic than GPT-4o. Of course, not everyone agrees. If you still miss the old models or remain unimpressed with the latest upgrades, the good news is that several legacy models are once again available: GPT-4o : The previous default model, designed for general use. : The previous default model, designed for general use. GPT-4.1 : Slightly better for specific, detailed queries, though similar to 4o overall. : Slightly better for specific, detailed queries, though similar to 4o overall. o3 : Formerly the go-to model for deeper questions, philosophical reflection, and more. : Formerly the go-to model for deeper questions, philosophical reflection, and more. o4-mini: A thinking model similar to o3 but better suited for simpler queries. Honestly, I think this is a great move and makes it clear that OpenAI, at least, is trying to listen to its customers. While GPT-5 will continue to improve in the coming weeks and months, more models (and the flexibility they provide) isn't a bad thing.
