Alphabet, the parent company of Google, reported its fourth-quarter earnings after the bell on Tuesday, revealing a miss on analysts’ expectations for ad revenue, a core aspect of the tech giant’s business. In response to the news, the stock slid 4% lower in extended trading.
While Alphabet’s revenue, excluding traffic acquisition costs for the third quarter, surpassed expectations at $72 billion compared to nearly $71 billion anticipated, investors appeared concerned about the advertising miss. Ad revenue amounted to $65.5 billion, falling short of the expected $65.8 billion. Despite the ad revenue miss, the overall revenue showed growth from $63.12 billion during the same period the previous year.
Alphabet reported continued growth in its cloud business, a segment gaining importance due to its role in AI development. Google Cloud revenue exceeded expectations, reaching $9.19 billion, marking a 26% increase from the previous year. The company is actively competing to claim additional market share in the cloud computing industry, currently holding the third position behind Amazon and Microsoft.
Key metrics from Alphabet’s Q4 earnings compared to Wall Street expectations:
During an analyst call, CEO Sundar Pichai and CFO Ruth Porat highlighted the company’s focus on streamlining operations for cost savings and efficiency. Pichai mentioned the winding down of non-priority projects, emphasising investment in growth areas. Porat discussed efforts to boost efficiency by removing organisational layers and slowing the pace of hiring, while still investing in top talent.
The earnings report follows recent layoffs at Google, part of an expense-cutting initiative to concentrate on growth areas like AI. Executives addressed concerns about AI potentially disrupting search products, with Pichai stating that AI tools expand Google’s capabilities, providing users with a diverse range of information sources online.
Google has been making efforts to enhance its search tools with AI, introducing initiatives like Bard and Search Generative Experience, and unveiling advanced large language models like Gemini. Despite the challenges, Alphabet’s Q4 earnings underscore its commitment to innovation and growth in key business segments.
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