SAN FRANCISCO (AP) — Google's digital ad sales continued to grow at a healthy clip during the holiday season, but that wasn't enough to offset investors' worries about whether its big bet on artificial intelligence will yield as big a jackpot as once envisioned.
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 6% drop in Alphabet's stock price after the numbers came out.
But the AI-generated summaries 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.
Google 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.
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