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Alphabet's search revenue disappoints in the fourth quarter| GuyWhoKnowsThings


Alphabet, Google's parent company, reported Tuesday that search revenue and a profit margin for its latest quarter fell short of Wall Street expectations, in a sign that growth in its flagship business and recent layoffsaimed at reducing costs, were not enough to offset its growing investment in artificial intelligence.

The Internet giant reported revenue from its search engine, its largest unit, at $48 billion in the fourth quarter, up 13 percent but slightly below analysts' estimate of $48.1 billion. .

The company said a measure of profitability, called operating margin, was 27 percent in the fourth quarter, below the 28 percent analysts were looking for. The company said its overall earnings rose 52 percent to $20.7 billion, beating Wall Street expectations of $20.2 billion, according to data compiled by FactSet.

Alphabet reported $86.3 billion in quarterly sales, up 13 percent from a year earlier and above analysts' estimate of $85.2 billion.

Alphabet has carried out a rolling game of layoffs in recent months, cutting jobs in advertising sales, YouTube, news and elsewhere. The cuts have been part of an effort by Sundar Pichai, Google's chief executive, to compensate for the Growing investment in artificial intelligence..

Alphabet shares fell more than 5 percent in after-hours trading Tuesday.

In 2022, rising interest rates and inflation made advertisers more thrifty, undermining sales and profits for Alphabet and its peers. Break and Goal, owner of Facebook and Instagram. After Google's advertising business recovered last year, investors expected advertisers to continue spending more.

Investing.com analyst Thomas Monteiro wrote in a note that the disappointing growth was a reminder that companies remained cautious with their ad spending.

“This report is a big warning sign for companies that rely on advertising,” Monteiro wrote, adding that Alphabet would have to continue improving its profit margins to offset weak growth, “even stepping on the accelerator to make more layoffs.”

As of December 31, Alphabet had 182,502 employees, up slightly from 182,381 three months earlier, but down from a year earlier. Some of the recent job cuts took place in January. At the end of 2019, the company's workforce stood at 119,000, before embarking on a hiring spree during the pandemic, when it saw a surge in use of its online services. The company cut 12,000 workers from its payroll early last year.

“We are being disciplined in the way we run the company,” Pichai said Tuesday afternoon in a conference call. “Teams are working to focus on key priorities and execute them quickly, removing layers and simplifying their organizational structures.”

Google has focused on its AI ambitions, hoping to overcome the perception that it is lagging behind OpenAI, the creator of the popular ChatGPT chatbot. Google launched its Gemini AI Modelits most powerful version yet, in December, and has worked on integrating the technology into its various products, including the Pixel smartphone, the Chrome web browser, and Bard, its ChatGPT competitor.

Running these types of systems is expensive because they require enormous amounts of computing power. Google has tried to cut costs to offset these expenses while preserving its famously high profits. Analysts had been closely monitoring the company's profit margin as Alphabet executives promised in recent quarters to continually reduce company expenses.

Google continues to rely on its advertising businesses to pay for these efforts. Advertising sales on YouTube, Google's video platform, rose 16 percent to $9.2 billion, meeting the $9.2 billion expected by analysts.

Google Cloud, the company's division that offers software and technology services to other businesses, reported sales rose 26 percent to $9.2 billion. Analysts had estimated $8.9 billion. The division had hoped other companies would take advantage of the opportunity to gain access to Google's generative AI systems, boosting their revenue, but its growth rate has slowed from previous years.


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