Google’s quarterly results paint a picture of an internet powerhouse getting stronger in AI age

SAN FRANCISCO (AP) — Google’s latest quarterly report provided further evidence that its internet empire is withstanding an artificial intelligence shakeup 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 also posting more than 30% sales growth in its division that powers data centers for AI services.

Those increases during the October-December period propelled Google’s corporate parent Alphabet Inc. well past the earnings forecasts of stock market analysts.

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

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

“Search saw more usage than ever before, with AI continuing to drive an expansionary moment,” Alphabet CEO Sundar Pichai said.

Google’s successful evolution has helped drive up Alphabet’s stock price nearly 60% in the past five months, giving it a $4 trillion market value. Even so, some investors are still skeptical whether Google will be able to sustain enough growth to justify the more than $300 billion that Alphabet will have spent from 2024 through the end of this year on expanding the computing capacity needed for AI features. Those worries caused Alphabet’s shares to see-saw between slight gains and declines during 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-delayed upgrade to its virtual assistant, Siri.

Google is also embedding more of its Gemini AI into its long-dominant search engine, Gmail and Chrome browser as it tries to avoid complacency and being outmaneuvered by up-and-coming companies such as OpenAI, Anthropic and Perplexity.

To meet the challenge, Alphabet has been on a spending spree to expand its AI capacity. After pouring $91 billion into capital expenditures devoted mostly to AI, the Mountain View, California, company disclosed Wednesday that it expects to double down by spending another $175 billion to $185 billion this year. Its capital expenditure budget has ballooned from about $30 billion annually since 2022 when OpenAI released its ChatGPT chatbot to much acclaim, prompting Google to pull out all the stops to catch up.

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

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

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

It looked like Google might be facing a potentially huge setback in 2024 when a federal judge condemned its search engine as an illegal monopoly in a case brought by the U.S. Justice Department. To curb Google’s abuses, the Justice Department proposed a breakup that would have required the sale of its Chrome browser.

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