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Alphabet Inc. (GOOGL)·Q4 2024 Earnings Summary

Executive Summary

  • Alphabet delivered strong Q4 2024 results: revenue $96.47B (+12% YoY), operating margin 32%, net income $26.54B, and diluted EPS $2.15; strength in Search and YouTube ads, and 30% growth in Google Cloud drove performance .
  • Management highlighted monetization parity of ads within AI Overviews with core Search formats and robust engagement from new AI features, pointing to durable ad revenue support as AI scales .
  • Cloud remained a highlight: revenue $12.0B (+30% YoY) with operating margin expanding to ~17.5%, though demand exceeded capacity exiting 2024; management plans a material CapEx step-up to address supply constraints .
  • 2025 guideposts: CapEx ~$75B (Q1: $16–18B), FX headwind to Q1 revenue from USD strength, one fewer day of revenue vs leap year in Q1’24, and depreciation growth to accelerate; advertising will lap 2024 insurance strength .
  • Dividend maintained at $0.20/share with Q4 dividend payments totaling $2.4B and a March 17, 2025 payment date for the next $0.20/share; shareholder returns included $15B repurchases in Q4 .

What Went Well and What Went Wrong

  • What Went Well
    • Search and YouTube ads outperformed; Search & other revenue rose to $54.03B (+13% YoY), YouTube ads to $10.47B (+14% YoY), with ad engagement boosted by AI features (AI Overviews, Circle to Search, Lens); “we actually see monetization at approximately the same rate” in AI Overviews .
    • Google Cloud sustained momentum: $11.96B revenue (+30% YoY), operating margin ~17.5% with strong AI infrastructure uptake and large strategic deals; “GCP grew at a rate that was much higher than cloud overall” .
    • Operating leverage improved: operating income +31% to $30.97B and free cash flow $24.84B in Q4, reflecting efficiency and mix shifts; “operating margin increased to 32%, representing 4.6 points of margin expansion” .
  • What Went Wrong
    • Capacity constraints in Cloud constrained revenue upside in Q4; management exited the year with demand exceeding available capacity .
    • Network advertising revenue continued to decline YoY (Q4: $7.95B, -4% YoY commentary); TAC rose to $14.85B (+6% YoY), and content acquisition/depreciation pressured cost of revenues .
    • 2025 near-term headwinds: stronger USD expected to pressure Q1 revenue, one fewer day vs leap year, and accelerated depreciation from stepped-up technical infrastructure investments .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Billions)$84.742 $88.268 $96.469
Diluted EPS ($USD)$1.89 $2.12 $2.15
Operating Income ($USD Billions)$27.425 $28.521 $30.972
Operating Margin (%)32% 32% 32%
Net Income ($USD Billions)$23.619 $26.301 $26.536
YoY Revenue Growth (%)14% 15% 12%
QoQ Revenue Growth (%)5% 4% 9%

Segment revenue and operating income

SegmentQ2 2024Q3 2024Q4 2024
Google Services Revenue ($USD Billions)$73.928 $76.510 $84.094
Google Cloud Revenue ($USD Billions)$10.347 $11.353 $11.955
Other Bets Revenue ($USD Millions)$365 $388 $400
Google Services Operating Income ($USD Billions)$29.674 $30.856 $32.836
Google Cloud Operating Income ($USD Billions)$1.172 $1.947 $2.093
Other Bets Operating Income (Loss) ($USD Billions)$(1.134) $(1.116) $(1.174)
Alphabet-level activities ($USD Billions)$(2.287) $(3.166) $(2.783)

Google Services detail

CategoryQ2 2024Q3 2024Q4 2024
Google Search & other ($USD Billions)$48.509 $49.385 $54.034
YouTube ads ($USD Billions)$8.663 $8.921 $10.473
Google Network ($USD Billions)$7.444 $7.548 $7.954
Subscriptions, platforms, devices ($USD Billions)$9.312 $10.656 $11.633

KPIs

KPIQ2 2024Q3 2024Q4 2024
Traffic Acquisition Costs (TAC) ($USD Billions)$13.387 $13.719 $14.848
Free Cash Flow ($USD Billions)$13.454 $17.637 $24.837
CapEx (Purchases of PP&E) ($USD Billions)$13.186 $13.061 $14.276
Employees (Number)179,582 181,269 183,323
Google Cloud Operating Margin (%)11% 17% 17.5%
Google Services Operating Margin (%)40% 40% 39%

Note on estimates: Wall Street consensus via S&P Global was unavailable at request time due to a provider limit. No estimate comparison is included.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
CapEx (Technical Infrastructure)FY 2025Increase expected in 2025; “likely not the same percent step-up as ’23 to ’24” Approximately $75B; Q1: $16–18B; quarterly variability from deliveries/construction Raised and quantified
DepreciationFY 2025Continued increases from higher technical infrastructure Growth rate to accelerate in 2025 Raised (accelerate)
Foreign Exchange ImpactQ1 2025Not specified previouslyLarger headwind to revenues from USD strengthening vs Q4 2024 New headwind
Leap Year Day CountQ1 2025Not applicableHeadwind from one less day vs leap year in Q1 2024 New headwind
Advertising verticalsFY 2025Lapping APAC-based retailer strength in 2H 2023 Lapping 2024 insurance strength within Financial Services Maintained caution (different vertical)
Cloud growth variabilityFY 2025Strong AI-driven demand; ongoing investment Growth rate variability depending on timing of new capacity coming online Introduced variability
DividendQ4 2024 / Q1 2025$0.20/share paid Dec 16, 2024 $0.20/share to be paid Mar 17, 2025; Q4 dividend payments totaled $2.4B Maintained level; scheduled date

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
AI in Search (AI Overviews, Circle to Search, Lens)AI Overviews boosted usage/satisfaction; Lens ~20B monthly visual queries; Circle to Search >100M devices Monetization in AI Overviews ~same rate; broader rollout; engagement rising especially younger users Expanding usage and monetization parity
Cloud AI Infrastructure & Vertex AICrossed $10B revenue & $1B op profit in Q2; strong AI infra, Vertex adoption; >2M developers Cloud $12B revenue, ~17.5% margin; GCP outgrowing Cloud; demand exceeded capacity Strong demand; capacity constraint emerging
CapEx strategy & efficiencyQ2/Q3: ~$13B quarterly; servers/data centers; step-up expected 2025; TPU & GPU mix 2025 CapEx ~$75B; Q1 $16–18B; depreciation growth to accelerate Material step-up to meet AI demand
YouTube monetization & Shorts/CTV#1 streaming watch time; shorts monetization gap narrowing; brand + DR strength YouTube ads +14% aided by election spend; Shorts monetization improved; CTV ~15% of Shorts viewing in U.S. Continued monetization progress
Macro/FX & CalendarQ2/Q3: FX headwinds; leap year boosted Q1’24 Larger FX headwind to Q1’25; fewer days vs leap year Near-term revenue headwinds
Regulatory/legalDOJ/antitrust context discussed; cookies decision implications No new specifics; continued focus on efficiency and compliance Stable backdrop
Subscriptions (YT TV, Music, Google One)Strong subscriber growth; price increase anniversary impacting growth rates Subscription/platform/device revenue +8% YoY; continued subscriber growth Ongoing growth; slower rate due to anniversary

Management Commentary

  • “Q4 was a strong quarter driven by our leadership in AI… Cloud and YouTube exited 2024 at an annual revenue run rate of $110 billion… we expect to invest approximately $75 billion in capital expenditures in 2025” — Sundar Pichai .
  • “We had another strong quarter… operating margin increased to 32%… We ended the quarter with [~$96B] in cash and marketable securities… Google Cloud operating margin increased from 9.4% to 17.5%” — Anat Ashkenazi .
  • “For AI Overviews… we actually see monetization at approximately the same rate” — Philipp Schindler .
  • “We exited the year with more demand than we had available capacity [in Cloud]” — Anat Ashkenazi .

Q&A Highlights

  • Search AI strategy: Pichai outlined expanding agentic experiences (Project Astra, deep research) and multimodal queries, with strong engagement/usage across demographics .
  • AI Overviews monetization: Schindler reiterated monetization near parity with traditional Search ad formats; continued innovation with ads within AI Overviews .
  • Cloud capacity constraints: CFO confirmed tight supply-demand exiting Q4; CapEx raised to address AI infra demand; potential variability in Cloud growth tied to capacity onboarding .
  • Cost curve and efficiency: Pichai emphasized full-stack efficiency, TPU/Blackwell partnerships, and improving inference economics; inference spend rising as share of AI costs .
  • 2025 headwinds: FX drag from USD strength and one fewer day in Q1; lapping insurance-led strength in Financial Services vertical .

Estimates Context

  • S&P Global consensus estimates were unavailable at the time of request due to a provider limit. No comparison to consensus is provided; users should revisit once access is restored.

Key Takeaways for Investors

  • Alphabet’s core ad engine is resilient amid AI transition: Search & YouTube ads grew double digits, with AI Overviews monetization parity supporting ad yield as AI usage expands .
  • Cloud margin expansion and AI momentum remain compelling, but near-term growth may be gated by capacity additions; the ~$75B 2025 CapEx plan is a key swing factor for both growth and depreciation drag .
  • Operating leverage is improving (Q4 op income +31%, FCF $24.8B), creating funding capacity for AI/data center investments while sustaining shareholder returns (Q4 buybacks $15B; dividend maintained) .
  • Watch Q1 2025 print for mechanical headwinds (FX and calendar) and insurance vertical lapping; underlying usage metrics and AI product rollouts should remain more indicative of medium-term trajectory .
  • YouTube’s continued monetization progress (Shorts, CTV, shopping/affiliate) and subscription growth underpin diversified revenue beyond Search .
  • Tactical: Strength in AI infra demand and large strategic Cloud deals suggest positive revisions once capacity ramps; near-term traders should anticipate volatility around CapEx/depreciation commentary and FX impacts .
  • Medium-term thesis: Full-stack AI approach (models + infra + products) plus scale distribution positions Alphabet to monetize AI across consumer and enterprise at improving unit economics over time .