{"id":1454261,"date":"2024-01-30T21:28:24","date_gmt":"2024-01-31T02:28:24","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1454261"},"modified":"2024-01-30T21:28:24","modified_gmt":"2024-01-31T02:28:24","slug":"google-tumbles-after-ad-revenue-operating-income-miss","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/google-tumbles-after-ad-revenue-operating-income-miss\/1454261\/","title":{"rendered":"Google Tumbles After Ad Revenue, Operating Income Miss"},"content":{"rendered":"

Google Tumbles After Ad Revenue, Operating Income Miss<\/span><\/p>\n

\n

As noted in our preview, JPM’s head of TMT trading said that GOOGLe is “probably the most controversial name of the group through our recent preview dinners\/lunches” <\/em>as it is “deemed a much lower quality play on AI” <\/em>while UBS added that investors have “viewed Alphabet apathetically using it as a funding short for other mega caps.”\u00a0 <\/strong>Indeed, from a\u00a0 positioning\/sentiment standpoint, GOOGL was the lowest of the mega-cap group at just 7.<\/p>\n

Commenting ahead of earnings, Evelyn Mitchell-Wolf, an analyst at Insider Intelligence said that \u201cit\u2019s been a full year since ChatGPT burst onto the scene, putting Google on red alert to defend its core search advertising business,\u201d and added that \u201con the heels of a landmark antitrust trial centered on that very business, Google Search performance should be yet unscathed.\u201d<\/p>\n

Echoing the sentiment, Mandeep Singh, an analyst at Bloomberg intelligence wrote that \u201cexpectations have come down for growth in its Cloud segment with the trend of optimization at enterprise customers hurting its growth more than rivals such as Microsoft Azure\u201d adding that \u201cGoogle has recently announced fee cuts to lure customers to its Cloud.\u201d<\/p>\n

Cutting to the chase, the big question into Alphabet’s earnings was what, if any, progress they had made on monetizing the AI promise without cannibalizing the company’s main moneymaker – search advertising; and just how much capex they blew on NVDA chips to feed the LLM-processing beast.<\/p>\n

So how did Alphabet do? Well, judging by the plunge in its stock after hours, not that hot.<\/p>\n

EPS $1.64, beating <\/strong><\/em>the est. $1.59
\n\tRevenue $86.31 billion, beating <\/strong><\/em>the est of $85.36 billion
\n\tRevenue ex-TAC $72.324, beating <\/strong><\/em>exp. $70.974 billion
\n\t\tGoogle advertising revenue $65.52 billion, missing <\/strong><\/em>exp. $65.8 billion
\n\t\tGoogle Search revenue $48.02 billion, missing <\/strong><\/em>exp. of $48.15 billion
\n\t\tYouTube ads revenue $9.20 billion, beating <\/strong><\/em>exp. $9.16 billion
\n\t\tGoogle Services revenue $76.31 billion, beating <\/strong><\/em>exp. $75.97 billion
\n\t\tGoogle Cloud revenue $9.19 billion, beating <\/strong><\/em>exp. $8.95 billion
\n\t\tOther Bets revenue $657 million, beating <\/strong><\/em>exp. $298.6 million<\/p>\n

<\/a><\/p>\n

The good news: Google beat on Cloud revenue, which came in at $9.192BN, beating estimates of $8.95BN. The bad news: it missed on Advertising, which came in at $65.5BN, below the $65.8BN expected (up from $59.0BN a year ago). And as everyone knows, when an economic slowdown hits, ad spending is the first to go…<\/strong><\/p>\n

<\/a><\/p>\n

Looking below the line, we find more of a mixed picture.<\/p>\n

Total operating income $23.70 billion, missing <\/strong><\/em>estimate $23.82 billion
\n\tGoogle Services operating income $26.73 billion, beating <\/strong><\/em>estimates of $25.75 billion
\n\tGoogle Cloud operating income $864 million, beating <\/strong><\/em>estimates of $427.4 million
\n\tOther Bets operating loss $863 million, beating <\/strong><\/em>the estimated loss of $1.26 billion<\/p>\n

<\/a><\/p>\n

In total, Google’s operating margin of 27%, missed estimates of 27.7%. Finally, capex of $11.02 billion was more than $1 billion higher than the estimate $9.82 billion. That means less cash for buybacks.<\/p>\n

Oh, and for those counting, the number of employees was roughly flat in Q4 at 182,502 up from 182,381 in Q3, when the number of employees slid from 186,779 in Q2.<\/p>\n

The disappointing results come at a time of broader uncertainty for Google\u2019s search engine, which has dominated the global internet for years and is the subject of a major\u00a0antitrust case. Its leading position is threatened by new competition as the rise of generative AI has enabled companies like Microsoft and OpenAI to deliver programs that answer users\u2019 questions in a more conversational fashion, like the wildly popular chatbot ChatGPT.<\/p>\n

Google has scramble to incorporate the (largely useless) technology into its own products, and last month released its most powerful large language model, called\u00a0Gemini. But Alphabet has been dogged by concerns that it\u2019s been to slow to capitalize on the shift in the market and has been playing catch up to Microsoft in the AI race.<\/p>\n

Commenting on the quarter, CFO Ruth Porat said that \u201cwe ended 2023 with very strong fourth quarter financial results, with Q4 consolidated revenues of $86 billion, up 13% year over year. We remain committed to our work to durably re-engineer our cost base as we invest to support our growth opportunities.\u201d<\/p>\n

As CEO Sundar Pichai\u00a0plows resources into AI and other big priorities, executives have scrutinized operations to identify places where they can make cuts. Earlier this year, the company eliminated\u00a0hundreds of employees\u00a0in areas including hardware, engineering, and the moonshot\u00a0technology lab X. More rounds of layoffs may follow this year, Pichai has said.<\/p>\n

And while we wait to see how many time CEO Sundar Pichai will mention AI and try to capitalize on the stupidity of headline scanning AI algos, it’s hardly surprising that he too was quite laudatory of his company’s numbers, saying that he was “pleased with the ongoing strength in Search and the growing contribution from YouTube and Cloud. Each of these is already benefiting from our AI investments and innovation. As we enter the Gemini era, the best is yet to come.\u201d<\/p>\n

Well, there are at least two mentions… only this time the magic is gone and while Sunday may be pleased, the market isn’t and the stock is sliding about 4% after hours, the second consecutive quarter when GOOGL stock has dumped on earnings.<\/p>\n

<\/a><\/p>\n

The stock may have a long way to drop from here if the AI myth ends up being just another chatbot bust: Wall Street has had high extremely expectations for Alphabet\u2019s efforts in AI, pushing the stock up almost 60% over the past 12 months, valuing the company at nearly $2 trillion. But now investors are looking for a sense of when the technology will actually start moving the needle for earnings and revenue. For now, the answer remains elusive.<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nTue, 01\/30\/2024 – 16:28<\/span><\/p>\n

\u200bRead More<\/a>\u00a0<\/p>\n

\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

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