Alphabet CEO Sundar Pichai walks to lunch on the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, on July 12, 2023.
David Paul Morris | Bloomberg | Getty Images
Alphabet shares slid greater than 6% in prolonged trading on Tuesday after the corporate reported ad revenue that missed analysts’ estimates.
Here are the important thing numbers:
- Earnings per share: $1.64 vs. $1.59 expected by LSEG, formerly referred to as Refinitiv.
- Revenue: $86.31 billion vs. $85.33 billion expected by LSEG.
- Google Cloud: $9.19 billion vs. $8.94 billion expected, in response to StreetAccount.
- YouTube ads: $9.2 billion vs. $9.21 billion expected, in response to StreetAccount.
- Traffic acquisition costs: $13.9 billion vs. $14.1 billion, in response to StreetAccount.
Alphabet reported its fastest quarter for revenue growth since early 2022, with sales climbing 13% from $76.05 billion a 12 months earlier, the corporate said in a statement. However, ad revenue of $65.52 billion trailed analysts’ estimates of $65.94 billion, in response to StreetAccount.
YouTube, which has been helping to drive accelerated growth, got here in only shy of expectations.
The results, while generally above estimates, weren’t enough to satisfy investors, who pushed the stock to fresh highs last week. Facebook’s ad business is growing faster, and TikTok represents an ongoing competitive threat as younger users turn to the app to create short viral videos.
Google Cloud stays a growth engine, with 26% expansion within the fourth quarter in comparison with a 12 months ago. The company can be drawing cash in on the cloud business, which was losing money for years because it tried to maintain up with Amazon Web Services and Microsoft Azure. Operating income within the fourth quarter was $864 million, following a year-ago lack of $186 million.
Across Alphabet, CEO Sundar Pichai continues to deal with investments in artificial intelligence and embedding recent generative AI tools into more of Google’s key products. To get there, Pichai has said the corporate has to make cuts elsewhere, meaning more layoffs on top of last 12 months’s 12,000 cuts, which amounted to roughly 6% of its full-time workforce.
“We are pleased with the continuing strength in Search and the growing contribution from YouTube and Cloud,” Pichai said in Tuesday’s press release. “Each of those is already benefiting from our AI investments and innovation.”
In December, Google launched the big language model called Gemini, which it considers its largest and most capable AI model up to now. The company is planning to license Gemini to customers through Google Cloud for them to make use of in their very own applications.
Alphabet said as a result of the workforce reductions last 12 months, the corporate recorded severance and related charges of $2.1 billion for 2023. Additionally, Google exited a few of its offices, leading to charges of $1.2 billion for the quarter and $1.8 billion for the 12 months.
Alphabet Chief Financial Officer Ruth Porat said on the earnings call that severance-related expenses in the primary quarter will likely be about $700 million.
Net income jumped 52% within the fourth quarter to $20.7 billion, or $1.64 per share, from $13.6 billion, or $1.05 per share, a 12 months earlier. Operating margin, the profit left after subtracting costs to run the business, expanded to 27% from 24%.
Other Bets, which incorporates the Waymo self-driving automobile business and the Verily life sciences unit, reported revenue of $657 million, up from $226 million the 12 months prior. Its loss narrowed to $863 million from $1.24 billion.
Alphabet shares are up 56% up to now 12 months, not including the after-hours drop. Shares of Meta and Microsoft have also reached fresh highs as investors proceed to pour into tech stocks.
Microsoft reported better-than-expected financials on Tuesday however it’s stock price also fell following the announcement. Amazon, Apple and Meta are scheduled to release results Thursday.
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