Google’s parent company, Alphabet (GOOG, GOOGL), released its fourth-quarter earnings on Tuesday, falling short of analysts’ expectations on ad revenue—the core of the tech giant’s business. The stock declined by 4% in extended trading.
Revenue, excluding traffic acquisition costs for Q4, reached $72 billion, surpassing expectations of nearly $71 billion. Despite this positive aspect, investors appeared focused on the advertising revenue miss. The company’s ad revenue amounted to $65.5 billion, slightly below the expected $65.8 billion.
Alphabet reported continued growth in its cloud business, a key focus for investors due to its significance in AI development. Google Cloud revenue exceeded expectations, reaching over $9 billion, showcasing more than 20% growth from the previous year.
Key Q4 metrics for Alphabet compared to Wall Street expectations:
- Revenue (excluding traffic acquisition costs): $72.32 billion vs. $70.97 billion expected ($63.12 billion in Q4 2022)
- Adjusted earnings per share: $1.64 vs. $1.59 expected ($1.05 in Q4 2022)
- Cloud revenue: $9.19 billion vs. $8.95 billion expected ($7.32 billion in Q4 2022)
- Ad revenue: $65.5 billion vs. $65.8 billion expected ($59.04 billion in Q4 2022)
Google CEO Sundar Pichai expressed satisfaction with the strength in Search and the growing contributions from YouTube and Cloud, attributing their success to AI investments and innovation.
The earnings report follows recent layoffs at Google across various divisions, part of the company’s effort to reduce expenses and prioritize growth areas, including AI. This strategic move aligns with broader trends across corporate America, where layoffs have become common to enhance efficiency post-COVID expansions.
In the AI landscape, Google has been working to catch up with Microsoft, a pioneer in consumer AI chatbots. Microsoft’s investments in OpenAI, the entity behind the popular chatbot ChatGPT, positioned it ahead in cultural excitement around AI.
Alphabet is actively vying for additional market share in the cloud computing arena, currently holding the third position behind Amazon and Microsoft.
