Google’s quarterly results paint a picture of an internet powerhouse going strong in the age of AI

SAN FRANCISCO (AP) — Google’s latest quarterly report provided more evidence that its Internet empire is weathering an artificial intelligence shake-up that’s turning into another potential boon for the company.

The numbers released Wednesday marked Google’s third consecutive quarter of digital ad growth of more than 10% from the previous year, while it also posted more than 30% sales growth in its division that manages data centers for AI services.

Those increases during the October-December period led Google’s corporate parent company Alphabet Inc. well beyond stock market analysts’ earnings forecasts.

Alphabet’s fourth-quarter profit rose 30% from a year earlier to $34.5 billion, or $2.82 per share, while revenue rose 18% to $113.8 billion.

The collective momentum of Google’s core business in search and advertising and the nascent field of AI indicates that a company born during the internet boom of the late 1990s is becoming even stronger during another technological phenomenon nearly 30 years later.

“Search has seen more use than ever, with AI continuing to drive an expansive moment,” said Alphabet CEO Sundar Pichai.

Google’s successful evolution has helped lift Alphabet’s stock price by nearly 60% in the past five months, giving it a market value of $4 trillion. Even so, some investors remain skeptical whether Google will be able to sustain enough growth to justify the more than $300 billion that Alphabet will have spent from 2024 to the end of this year to expand the computing capacity needed for AI features. That worry caused Alphabet shares to see-saw between small gains and declines in extended trading after Wednesday’s report came out.

Apple, also currently worth $4 trillion, thinks so highly of Google’s AI that the iPhone maker recently struck a deal to use Google’s Gemini technology in a long-running upgrade to its virtual assistant, Siri.

Google is also incorporating more of its Gemini AI into its search engine, Gmail and Chrome browser, as it tries to avoid complacency and being overtaken by new companies like OpenAI, Anthropic and Perplexity.

To meet the challenge, Alphabet has been on a spending spree to expand its AI capability. After pouring $91 billion in capital spending devoted mostly to AI, the Mountain View, California company revealed Wednesday that it expects to double that by spending $175 billion to $185 billion this year. Its capital expenditure budget has increased by around $30 billion a year from 2022 when OpenAI released its ChatGPT chatbot to much acclaim, prompting Google to pull out all the stops to keep up.

Alphabet’s projected capital expenditure budget represents nearly half of its 2025 revenue of $403 billion — a “jarring” commitment, said Ethan Feller, stock strategist for Zacks Investment Research.

But the last quarter “supports the view that Google is spending on strength and differentiation, not spending to stay relevant,” said Investing.com’s Thomas Monteiro.

Google’s strong digital ad business is helping to fund the spending spree. Its digital ad sales totaled $82.3 billion in the fourth quarter, up 14% from a year earlier. Google Cloud, which oversees the data centers behind many AI services, posted revenue of $17.7 billion, up 48%.

It appeared that Google could be facing a potentially huge blow in 2024 when a federal judge ruled its search engine an illegal monopoly in a case brought by the US Department of Justice. To curb Google’s abuses, the Justice Department proposed a breakup that would require the sale of its Chrome browser.

But US District Judge Amit Mehta rejected that idea and ordered less severe changes, in part because he believed the addition of AI would help rein in Google. Both the Justice Department and Google are appealing that decision.