Why is Alphabet Inc. stock outperforming the market?

Alphabet Inc. reported a strong financial performance for the fourth quarter, with an earnings per share (EPS) of $2.15, surpassing the consensus estimate of $2.13. The company achieved a 12% year-over-year revenue growth, totaling $96.5 billion, driven by robust performances in Google Services and Google Cloud. Google Services revenue increased by 10% to $84.1 billion, while Google Cloud revenue surged by 30% to $12 billion. CEO Sundar Pichai highlighted the company's focus on AI and its full-stack approach to innovation as key contributors to these results. However, the revenue slightly missed the Street consensus estimate of $96.6 billion. Despite the positive earnings, Alphabet's announcement of $75 billion in expected capital expenditures for 2025 led to a 7% decrease in its stock price in after-hours trading, as investors expressed concerns over potential impacts on free cash flow. Analysts have mixed views on this expenditure, with some seeing it as essential for long-term growth in AI and cloud services. Oppenheimer and Scotiabank analysts maintained an Outperform rating, raising their price targets, while JPMorgan's analyst noted the importance of the 2025 outlooks for potential margin expansion. Alphabet is perceived as a leading Mega Cap stock for 2025, benefiting from AI advancements, despite facing regulatory challenges from the Department of Justice.