What’s happening: Shares of Alphabet fell sharply in after-hours trading on Tuesday, following the release of the company’s fourth-quarter results.
What happened: The Google parent reported better-than-expected earnings for the fourth quarter.
The stock came under pressure on the weak growth of the company’s cloud sales.
How were the results: The Mountain View, California-based company reported low double-digit growth in sales for the latest quarter.
Why it matters: Alphabet has continued to spend heavily on AI, amid rising competition. Shares of US tech majors with huge AI investments fell sharply last week, after China’s AI startup DeepSeek claimed said it had created an AI model at a much lower cost and one that needed significantly lower processing power.
Alphabet announced plans to increase its capital expenditures to $75 billion in 2025, from $52.5 billion in the previous year. The figure was also much higher than market estimates of $57.9 billion.
Google Services revenues rose 10% year-over-year to $84.1 billion in the fourth quarter, with strong momentum in Google Search and YouTube ads. Advertising revenues climbed 10.6% to $72.46 billion, topping estimates of $71.84 billion.
Google Cloud’s business also surged, with revenues jumping 30% year-over-year to $12 billion. However, the growth marked a deceleration from the 35% surge recorded in the September quarter and the figure came in below market estimates of $12.16 billion.
“We are building, testing, and launching products and models faster than ever, and making significant progress in compute and driving efficiencies. Together, Cloud and YouTube exited 2024 at an annual run rate of $110 billion. Our results show the power of our differentiated full-stack approach to AI innovation and the continued strength of our core business,” CEO Sundar Pichai said.
How shares responded: Alphabet’s shares tanked 7.6% to $190.76 in extended trading on Tuesday, following the release of quarterly results. The stock has added 9% year to date.
What to watch: Investors will continue monitoring the company’s investments in AI and the adoption of its AI model with rising competition from DeepSeek.
Context: The GBP/USD edged higher this morning as investors monitored the Bank of England’s monetary policy outlook.
Details: Investors have been monitoring comments around tariffs by US President Donald Trump. The US had earlier announced 25% tariffs on Mexico and Canada and 10% levy on China but later delayed the tariffs on its North American neighbours. While Trump is looking to impose tariffs on the European Union and the UK as well, he has not issued a commencement date.
China retaliated to the 10% tariffs announced by Trump by imposing tariffs on US goods. The Asian dragon also announced an investigation into Google, raising concerns of a trade war.
Amid these ongoing market uncertainties that could potentially impact global economic growth, investors are looking to the Bank of England to slash interest rates several times this year to provide support to the UK economy. Markets widely expect the BoE to announce a rate cut at its upcoming meeting.
Weakness in the US dollar lent support to the GBP/USD this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell 0.1% to 107.88.
The GBP/USD forex pair edged higher to 1.2483 this morning, while the EUR/GBP forex pair rose slightly to 0.8322.
London’s FTSE 100 Index fell 0.15% to close at 8,570.77 on Tuesday, recording losses for a second session in a row. The domestically focused FTSE 250 slipped 0.28% to settle at 20,653.26.
What to watch: Investors await the release of economic data on UK’s new car sales (1300 UAE Time), S&P Global services PMI (1330 UAE Time) and S&P Global composite PMI (1330 UAE Time) today.
New passenger car registrations in the UK, which declined 0.2% year-over-year to 140,786 units in December, are expected to increase 4% in January. Analysts expect the S&P Global UK services PMI to rose to 51.2 in January, from December’s reading of 51.1, while the composite PMI is projected to improve to 50.9 in January, versus the 14-month low of 50.4 in December.
Other Markets: US trading indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.30%, 0.72% and 1.26%, respectively.
Ukraine’s President Volodymyr Zelenskyy said he was open to holding direct talks with Russia’s President Vladimir Putin to end the war. The news sent the safe-haven US dollar index lower in forex trading this morning.
China’s Caixin general services PMI fell to 51.0 in January, from 52.2 in the previous month. The latest reading also missed market estimates of 52.3, which exerted pressure on the CNY/USD forex pair.
Philippines’ annual inflation rate came in unchanged from the previous month at 2.9% in January. The figure exceeding market estimates of 2.7% sent the PHP/USD pair lower in forex trading this morning.
Singapore’s S&P Global PMI declined to 49.9 in January, from 51.5 in December. This being the first contraction in the private sector in nearly two years exerted pressure on the SGD/USD forex pair.
Japan’s au Jibun Bank composite PMI rose to 51.1 in January, from 50.5 in the previous month. This being the third straight month of growth in private sector activity sent the JPY/USD pair higher in forex trading this morning.
Spain’s HCOB services PMI (1215 UAE Time) and HCOB composite PMI (1215 UAE Time), Italy’s HCOB composite PMI (1245 UAE Time), HCOB services PMI (1245 UAE Time) and retail sales (1300 UAE Time), France’s HCOB services PMI (1250 UAE Time) and HCOB composite PMI (1250 UAE Time), Germany’s HCOB composite PMI (1255 UAE Time) and HCOB services PMI (1255 UAE Time), Eurozone’s HCOB composite PMI (1300 UAE Time), HCOB services PMI (1300 UAE Time) and PPI (1400 UAE Time), India’s M3 money supply (1530 UAE Time), Brazil’s industrial production (1600 UAE Time), S&P Global services PMI (1700 UAE Time) and S&P Global composite PMI (1700 UAE Time), Mexico’s gross fixed investment (1600 UAE Time), US MBA mortgage applications (1600 UAE Time), ADP employment change (1715 UAE Time), balance of trade (1730 UAE Time), S&P Global composite PMI (1845 UAE Time), S&P Global services PMI (1845 UAE Time), ISM services PMI (1900 UAE Time), EIA crude oil stocks change (1930 UAE Time), EIA gasoline stocks change (1930 UAE Time), EIA distillate stocks change (1930 UAE Time), Canada’s balance of trade (1730 UAE Time), S&P Global composite PMI (1830 UAE Time) and S&P Global services PMI (1830 UAE Time), as well as Russia’s unemployment rate (2000 UAE Time), business confidence (2000 UAE Time), corporate profits (2000 UAE Time), industrial production (2000 UAE Time), real wage growth (2000 UAE Time) and retail sales (2000 UAE Time).