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Alphabet’s revenues undershot estimates in the fourth quarter as the search giant’s cloud business grew slower than expected, while it continued to accelerate its spending on data centres in response to demand from artificial intelligence.

Revenue rose 12 per cent to $96.5bn in the three months through December compared with the same period the previous year. Excluding traffic acquisition costs, that figure was $81.6bn, missing Wall Street estimates in a Bloomberg poll of $82.8bn. Net income rose 28 per cent to $26.5bn.

Alphabet shares dropped more than 6 per cent in after-hours trading. The stock had previously risen 45 per cent in the past 12 months, giving it a market capitalisation of $2.5tn and making it the fifth most-valuable listed company in the world behind Apple, Microsoft, Nvidia and Amazon.

While Google Cloud services business posted a 30 per cent increase to almost $12bn, this was slower than the 35 per cent growth rate in the third quarter, and below the $12.2bn analysts had forecast.

Alphabet’s spending on AI infrastructure continued to escalate in step with its Silicon Valley rivals. Fourth-quarter capital expenditure jumped to $14.3bn, up from $11bn last year and exceeding expectations for $13.2bn.

Chief executive Sundar Pichai said: “We are confident about the opportunities ahead, and to accelerate our progress, we expect to invest approximately $75bn in capital expenditures in 2025.”

Last week, Microsoft revealed it spent $22.6bn in the comparable three-month period, but its shares fell sharply after sales in its Azure cloud computing unit also disappointed. Meta’s quarterly capex was $14.6bn, with CEO Mark Zuckerberg pledging to spend “hundreds of billions” more to stay in the vanguard of AI research and products.