AI demand is outstripping Google Cloud’s capacity to deliver it, Alphabet’s CFO Anat Ashkenazi admitted on an earnings call late Tuesday.
“We have been seeing very strong demand for our AI products in the fourth quarter in 2024. And we exited the year with more demand than we had available capacity. So, we are in a tight supply demand situation, working very hard to bring more capacity online” he told analysts.
Alphabet reported a record $350 billion in revenues in 2024. It is spending that money too – with $75 billion in CapEx planned for 2025, 11 new Google Cloud regions and seven subsea cable projects underway.
AI was a big driver of cloud buildout and adoption, executives said – a week after they announced that Google Cloud was the first hyperscaler to have a customer running on NVIDIA Blackwell H200s. Of that record CapEx sum, “the majority of that is going to go toward our technical infrastructure, which includes servers and data centers,” said Ashkenazi.
Google Cloud revenue increased by 30% to $12 billion in Q4 with operating income up to $2.1 billion – a turnaround from 2022’s losses.
Breaking out the numbers on a Q4 earnings call, CEO Sundar Pichai said Alphabet would be raising headcount in its fiscal 2025 on strong growth.
Google Cloud: Several deals worth $1 billion+
Search and Google Cloud were the biggest contributors to revenues and on the latter, it closed “several strategic deals over $1 billion,” in 2024, “and the number of deals over $250 million doubled from the prior year.”
Executives cited new partnerships with Mercedes-Benz and an expanded one with Citi. The latter is using Google Cloud to “improve its digital products, streamline employee workflows and use advanced high-performance computing to enable millions of daily computations [and] fuels Citi's generative AI initiatives across customer service, document summarization and search to reduce manual processing…”
See also: Citigroup touts data efforts as senator snarls, regulators circle
Alphabet’s leaders talked up major improvements in data centre energy efficiency and chip performance as it continues to develop its own accelerators. (“Google data centers deliver nearly four times more computing power per unit of electricity compared to just five years ago.”)
Philipp Schindler, Chief Business Officer highlighted Alphabet’s rebuilt Google Shopping experience too and added: “We've already started testing Gemini 2.0 in AI Overviews and plan to roll it out more broadly later in the year. In Search, we're seeing people increasingly ask entirely new questions using their voice, camera or in ways that were not possible before…We're making these benefits available to more consumers.”
No earnings call to a company spending this much on data centre capacity can pass without a mention of DeepSeek of course. What was the impact? Sundar Pichai took that one and was warm in his praise – a different approach to that of, say, Palantir, which this week told investors that the US was “at war with China” over both AI and other issues.
“First of all, I think [they are a] tremendous team. I think they've done very, very good work…” Pichai told analysts, adding that across generative AI use “the proportion of the spend toward inference compared to training has been increasing, which is good because, obviously, inferences to support businesses with good ROIC.
“I think the reasoning models, if anything, accelerates [sic] that trend because it's obviously scaling upon inference dimension as well… part of the reason we are so excited about the AI opportunity is, we know we can drive extraordinary use cases because the cost of actually using it is going to keep coming down, which will make more use cases feasible.
“That's the opportunity space. It's as big as it comes.”
