Alphabet's growth disappoints investors
Google's sales and profits are rising, but investors may have expected more. On top of that, Google spends more money than it earns, and at a faster pace.
(Image: Daniel AJ Sokolov)
The Google Group Alphabet reports another record year. In 2024, revenue grew by almost a seventh to 350 billion US dollars, or almost one billion dollars per day. The data company was even able to increase its operating margin by five percentage points to 32%, while Alphabet's net profit reached twelve figures for the first time. Nevertheless, the share price fell by more than seven percent in after-hours trading following the announcement of the quarterly and annual figures.
Institutional investors may have hoped for better results. Alphabet shares had briefly reached a new all-time high in regular Tuesday trading before the publication of the financial figures. Perhaps some investors are also bothered by the fact that Alphabet's reserves are shrinking. This clouds the prospects for better dividends. Alphabet spent more than 62.2 billion dollars on share buybacks in 2024, but not even 7.4 billion dollars on real dividends. That is only around six percent of pre-tax profit.
“AI galore”
Group CEO Sundar Pichai spoke of a “strong quarter, driven by AI” in the usual conference call with analysts. His Chief Business Officer Philipp Schindler spoke of a higher return on investment for advertising that is controlled by AI. Pichai emphasized the increased efficiency of his company; for example, the data centers now perform almost four times as many calculations per unit of electrical energy used as they did five years ago.
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When it comes to AI, Alphabet has the advantage of developing all parts itself, software and hardware. The search engine now produces AI-generated results in over 100 countries (if you don't use the trick for Google pure). This leads to greater use of the search engine. Although this is good for its advertising revenue, it does not necessarily mean that the results will be better.
On Wednesday, Google's new AI model Gemini 2.0 Flash will be released, and the management has high hopes for it. Pichai is also pleased with the progress made by Waymo, the Alphabet subsidiary for self-driving cabs. Waymo transported four million passengers in 2024 and now transports more than a quarter of a million a week, and the trend is rising. The new, sixth Waymo generation is significantly cheaper in terms of hardware. The cab service is to be expanded to Austin, Atlanta, and Miami this year, and Tokyo, the first city outside the USA, is also on the roadmap.
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