Alphabet, Google’s parent company, exceeds revenue expectations, yet stocks decline after hours.
Google is performing solidly, though not meeting investor hopes. Despite Alphabet’s impressive third-quarter earnings announcement, Google Cloud revenue missed analyst expectations. Alphabet’s stock dropped in after-hours trading, despite third-quarter revenue of $76.69 billion, surpassing analyst estimates.
YouTube, grappling with rivals like TikTok, exceeded expectations with $7.95 billion in revenue versus the anticipated $7.81 billion. Daily views on Shorts, their response to TikTok, increased from 50 billion at the start of the year to 70 billion per day. During an investor call, Sundar Pichai, the CEO, introduced new features for Shorts, featuring AI-driven video editing tools.
Despite progress, Google Cloud revenue fell short at $8.41 billion, missing the expected $8.64 billion, raising concerns among investors about the company lagging behind cloud-computing giants like Amazon and Microsoft. However, this decline wasn’t industry-wide; Microsoft’s Azure experienced robust growth in the third quarter, boosting the company’s revenue and profit beyond expectations.
Recent reports from Alphabet have emphasized their focus on artificial intelligence, a technology they’ve long championed and integrated into tools such as Search. Pichai stated that this quarter’s overall growth is attributed to Alphabet’s extensive incorporation of artificial intelligence in nearly all its sectors.
Nonetheless, the disappointment has tempered the enthusiasm for AI as Alphabet’s savior, as its advertising revenue has faced challenges amidst a broader economic downturn. This development follows Cloud’s earlier outperformance, turning a profit in Q1, marking a significant milestone since its inception in 2008.
Max Willens, a senior analyst at Insider Intelligence, observed, “Cloud computing is a more irregular business compared to advertising, and Google faces robust competition. Although its potential with AI startups may pay off in the long term, it currently falls short of satisfying investors regarding Google Cloud.”
In addition to the economic challenges affecting Alphabet’s predominant revenue source, advertising, investors remain cautious due to a prominent antitrust lawsuit filed by the US government against the company for online search monopolization. This lawsuit is ongoing.
During the economic downturn, Alphabet implemented a series of cost-cutting measures in 2023. In January, they revealed plans to reduce their global workforce by over 12,000 jobs, which equated to 6% of their employees. In September, the company further reduced roles in its recruiting division and scaled back on new hires. An internal memo from March disclosed that Alphabet would also be discontinuing some employee benefits. Just last week, Google trimmed positions at its Waymo self-driving car subsidiary and at Verily, its biotech venture.
In addition to these internal adjustments, Alphabet underwent changes in its executive leadership. The recent report marks the first following the announcement of the departure of Ruth Porat, the chief financial officer, who is taking on the newly established role of “president and chief investment officer.
