Alphabet slides 3% in after-hours trade as earnings fall slightly short of elevated expectations
AInvestTuesday, Jan 30, 2024 4:47 pm ET
2min read
GOOG --


Alphabet (GOOGL), the technology titan known for continually evolving its search engine, advertising platforms, and cloud services, has set the bar high for industry growth and innovation. In recent years, Google has expanded its reach beyond its core search capabilities, delving into the realms of digital advertising, content streaming through YouTube, and enterprise solutions via Google Cloud. These segments have not only become integral to Google's revenue streams but have also underscored the company's commitment to diversifying its business model. As the recent financial data indicates, Google's various business units have experienced significant year-over-year growth, reflecting the high expectations stakeholders have for the company's continued market leadership and financial performance.

In its latest quarterly earnings report, the tech giant Alphabet Inc. (GOOGL) surpassed analyst expectations, posting an earnings per share figure of $1.64, excluding non-recurring items, which was $0.05 better than the FactSet Consensus of $1.59. This impressive performance was accompanied by a 13.5% year-over-year (YoY) increase in revenue, reaching $86.31 billion, surpassing the FactSet Consensus of $85.28 billion.

Alphabet's revenue excluding traffic acquisition costs (TAC) in Q4 was $72.32 billion, outperforming the estimated $70.97 billion. By segment:

- Google Search and Other: Revenue hit $48.0 billion, with a remarkable year-over-year (YoY) growth of 12.7%, highlighting the enduring strength of Google's core search business. 

- Google Advertising: Total revenue was reported at $65.52 billion, narrowly missing the anticipated $65.8 billion, yet the segment still demonstrated a solid YoY growth of 11.0%. 

- YouTube Ads: The platform saw revenues of $9.2 billion, surpassing the expected $9.16 billion and marking an impressive YoY growth of 16.5%. 

- Google Services: Although revenue reached $76.31 billion, it slightly fell short of the $75.97 billion estimate, signaling a need to scrutinize the factors affecting this segment. 

- Google Cloud: With a revenue of $9.19 billion, it comfortably exceeded the estimate of $8.95 billion, reflecting Google's competitive edge in the cloud sector. 

- Other Bets: This segment outperformed expectations significantly, generating $657 million against the estimated $298.6 million, pointing towards successful ventures outside Google's mainstay services.

Google Search and Other revenue amounted to $48.0 billion, reflecting a strong YoY growth of 12.7%. Google Advertising revenue reached $65.5 billion, marking an 11.0% increase compared to the previous year. YouTube Ads revenue reached $9.2 billion, a YoY increase of 16.5%. 

A standout performer was Google Cloud, with revenues of $9.2 billion and a YoY growth of 26%. Despite missing expectations in the previous quarter, Google Cloud showed improvement, delivering strong results. The segment also achieved an operating income of $864 million.

A closer analysis of the results reveals a sequential acceleration on every line, particularly for Cloud and YouTube. The increase in revenue and earnings defied earlier concerns following the stock's decline when the growth in search had not accelerated in the previous quarter.

Alphabet's efforts to optimize its cost base led to a reduction of its workforce, resulting in employee severance and related charges of $2.1 billion for the twelve months ended December 31, 2023. The company is also taking actions to optimize its global office space, resulting in exit charges of $1.2 billion and $1.8 billion for the three and twelve months ended December 31, 2023, respectively. These actions highlight Alphabet's dedication to maintaining efficiency and agility in the face of evolving market dynamics . 

Alphabet's operating income for the fourth quarter amounted to $23.70 billion, slightly below the estimated $23.82 billion. Google Services operating income reached $26.73 billion, surpassing the estimate of $25.75 billion. Google Cloud operating income stood at $864 million, outperforming the estimated $427.4 million. The Other Bets segment recorded an operating loss of $863 million, better than the estimated loss of $1.26 billion. 

Capital expenditure for the quarter was $11.02 billion, higher than the estimated $9.82 billion, and the company had a total of 182,502 employees at the end of the quarter. 

Shares of GOOG slipped 3.5% in after hours trade as the company faced high expectations.  The stock has erased gains from the last week and is setting up to test iits 20-sma ($143) in after hours trade. 

Overall, Alphabet's strong financial performance reflects its ability to adapt and thrive in the dynamic tech landscape. The company's various segments, including Google Search, YouTube Ads, Google Advertising, and Google Cloud, have exhibited robust growth, contributing to the success of the organization. As Alphabet continues to streamline its operations and invest in growth opportunities, it remains well-positioned for future success.


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