Alphabet misses Street estimates as ad business slips after pandemic run-up
ALPHABET on Thursday fell short of Wall Street expectations for fourth-quarter profit and revenue and chief executive Sundar Pichai said Google’s digital ad clients pulled back spending more in the period than in the preceding quarter.
Shares of Alphabet were down nearly 5 per cent in after-hours trading, after losing about 40 per cent of their value in 2022.
Shares of other tech companies Apple and Amazon also fell after they posted disappointing results on Thursday, wiping off gains after Facebook parent Meta Platforms on Wednesday boosted tech shares with news on cost cuts and a large buyback.
Pichai echoed Meta boss Mark Zuckerberg on cost efficiencies, saying in a statement: “We’re on an important journey to re-engineer our cost structure in a durable way.”
Advertisers, who contribute the bulk of Alphabet’s sales, have cut their budgets as rising inflation and interest rates fueled concern over consumer spending.
Consumers had flocked to the internet for everyday purchases during the height of the pandemic but have returned to in-person shopping as restrictions have eased.
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“Our revenues this quarter were impacted by pullbacks in advertiser spend and the impact of foreign exchange,” Pichai told analysts on a conference call.
He said artificial intelligence (AI) software will be an important focus for the company and that it plans to make its LaMDA chatbot software publicly available in the coming weeks.
Mountain View, California-based Alphabet decided to cut 12,000 jobs last month, representing about 6 per cent of its overall workforce, and said it was doubling down on AI.
Alphabet, long a leader in AI, is facing competition from Microsoft Corp, which is reportedly looking to boost its stake in ChatGPT – a promising chatbot that answers queries with human-like responses.
“Despite being seen as one of the most insulated companies in the advertising space relative to peers, Alphabet’s poor quarter is the latest sign that worsening fundamentals and a tough macroeconomic environment are prompting advertisers to cut back on spending,” said Jesse Cohen, senior analyst at Investing.com.
Net income fell to US$13.62 billion, or US$1.05 per share, from US$20.64 billion, or US$1.53 per share, a year earlier.
Adjusted profit of US$1.05 per share fell short of an expected US$1.18 per share, according to Refinitiv.
Revenue from Google advertising, which includes Search and YouTube, fell 3.6 per cent to US$59.04 billion.
Total revenue rose to US$76.05 billion in the fourth quarter from US$75.33 billion a year ago. Analysts were expecting US$76.53 billion.
Google is the world’s largest digital ad platform by market share, making it uniquely susceptible to fluctuations in online marketing spending. Its YouTube division has faced a surge in rival platforms, particularly TikTok, whose endless scroll of short video is drawing younger users away.
Alphabet chief financial officer Ruth Porat said the company’s total capital expenses this year will be in line with last year.
Revenue from YouTube ads, one of Alphabet’s most consistent money-makers, fell nearly 8 per cent to US$7.96 billion, well below the estimate of US$8.25 billion, according to FactSet.
Cloud was a bright spot, however, with revenue growing 32 per cent to US$7.32 billion, but at its slowest pace since the company began disclosing the segment’s revenue numbers. REUTERS
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