Why Alphabet Stock Plunged 22% in the First Quarter

Core Viewpoint - Alphabet's stock experienced a significant decline following its Q4 earnings report, raising questions about its investment potential despite long-term growth prospects [1][2][4]. Financial Performance - Alphabet's Q4 report showed solid bottom-line earnings, but revenues fell short of analyst expectations, particularly in the Google Cloud segment, which faced challenges [2][3]. - YouTube and search-based sales exceeded expectations, but overall market reaction was negative, with the stock closing 7.3% lower the following day due to high holiday-quarter expectations [2]. Investment and Growth Strategy - The company plans to increase its capital expense budget to $75 billion in 2025, a 43% increase from the previous year, to support AI infrastructure development [3]. - Despite concerns over lower free cash flows due to accelerated spending, Alphabet's long-term growth in next-generation technologies like AI and quantum computing is expected to outperform the market [4][6]. Market Position and Historical Performance - Over the past year, Alphabet's stock has mirrored broader market trends, with more pronounced fluctuations [5]. - The company's Class A stock has achieved a compound average growth rate (CAGR) of 20.1% over the last five years, outperforming the S&P 500's 15.5% CAGR during the same period [6]. Long-term Outlook - Alphabet is positioned for long-term success due to its adaptability and leadership in transformative technologies, making it a potentially attractive buy after recent price corrections [7].