Alphabet disappointed its investors when holiday advertising sales fell below expectations. This overshadowed the company’s efforts to develop artificial intelligence and cloud computing.
Google, the owner of YouTube and Google, fell short on estimates for advertising revenues in the fourth quarter. The average estimate was $66.1 billion and $59 billion during the same period a year earlier. Profits increased by 52 percent to $20.7 billion.
Alphabet shares fell $.848, or 5.5%, in late Wall Street trading after the results were announced. The company was valued at $1.91 billion.
Alphabet is facing stiff competition from other platforms, such as Facebook and Instagram, TikTok, Amazon, along with mixed economic signals coming out of the United States. Google, which invented the technology that is the foundation of today’s artificial-intelligence boom, also competes against two other players who have caught the attention of the business world — OpenAI, ChatGPT creator, and Microsoft, Microsoft’s financial backer.
Google will bring a series of models, called Gemini, to Bard. Its ChatGPT competitor. Google has struck a deal with Anthropic to invest up $2 billion as it tries to lure customers away from Amazon and Microsoft. It is also putting Gemini in the hands of advertisers to keep their money flowing into Google’s search business.
The overall revenue for the quarter ended December was $86.3 Billion, which is higher than the $85.3 Billion estimated by analysts. Alphabet reported that Google Cloud revenue for the last quarter was $9.2 Billion, whereas analysts expected $8.9 Billion. This marked a reacceleration in cloud revenue growth compared to the previous quarter, which was 25.7 percent. However, it was slower than the 32 percent growth of the same quarter last year.
Thomas Monteiro said that the disappointing ad revenues of Alphabet suggest that companies worldwide are still uncertain as to how fast central banks will be reducing interest rates.
The earnings report is just weeks after Google laidoff hundreds of employees across several divisions to reduce expenses and focus more on areas of growth, such as AI. The tech giant has joined several of its peers as well as other corporate America companies that have used layoffs to increase efficiency following the significant expansion of the Covid pandemic.
The company reported that severance costs and related charges totaled $2.1 billion for the redundancies of last year. Ruth Porat said that on the earnings conference, severance related expenses for the first quarter this year would be around $700 million.
Sundai Pichai said, “We’re pleased with the continued strength of search, and the growing contributions from YouTube and Cloud.” Our AI investments and innovations are already benefiting each of these.