On January 31st, after the market closed, Google's parent company Alphabet released its financial report for the fourth quarter of 2023. According to the report, Alphabet's fourth-quarter revenue was $863.1 billion, a year-on-year increase of 13.5%, surpassing analysts' average expectation of $853.3 billion; net profit was $20.687 billion, a year-on-year increase of 51.8%; operating profit was $23.697 billion, a year-on-year increase of 30.5%; earnings per share were $1.64, exceeding analysts' average expectation of $1.59.
The report also showed that Alphabet's full-year revenue for 2023 was $3,073.94 billion, a year-on-year increase of 9%; net profit was $73.795 billion, with earnings per share of $5.80.
Due to the advertising revenue of Alphabet falling short of expectations, the company's stock price fell by over 6% in after-hours trading on Tuesday. On that day, Alphabet's stock price closed at $151.46 per share, down by 5.62%.
Breaking down by business segment, in the fourth quarter, Google Services' total revenue was $763.11 billion, with an operating profit of $26.73 billion. This includes Google's advertising revenue from Google Search and other services, YouTube ads, and Google Network, totaling $655.17 billion, with other business revenue at $10.794 billion.
Google Cloud's revenue for the fourth quarter was $9.192 billion, with an operating profit of $864 million. In comparison, Google Cloud reported a loss of $186 million in the same period last year.
Other Bets, including divisions like Verily and Waymo, generated revenue of $657 million in the fourth quarter, narrowing down the operating loss from $1.24 billion in the same period last year to $863 million.
Traffic acquisition costs for the fourth quarter amounted to $13.9 billion, slightly lower than analysts' expectations of $14.1 billion.
Alphabet stated that the fourth quarter of 2023 marked the fastest revenue growth since early 2022, with a 13% increase from the same period last year's $760.5 billion. However, Google's advertising revenue for the fourth quarter was $655.17 billion, below analysts' expectation of $659.4 billion.
YouTube advertising revenue, which has been instrumental in driving the company's revenue acceleration, also fell slightly short of expectations.
Alphabet faces fierce competition in the advertising business from other online platforms such as Facebook, Instagram, TikTok, and Amazon, while recent economic data in the United States has been mixed. Thomas Monteiro, a senior analyst at Investing.com, commented, "Alphabet's advertising revenue performance falling short of expectations indicates ongoing uncertainty in the global business environment."
Google Cloud remains a primary growth engine for the company, with revenue growing by 26% year-on-year in the fourth quarter of last year. Google Cloud has been striving to catch up with Amazon Web Services (AWS) and Microsoft Azure, and after years of losses, it turned profitable in the fourth quarter of last year. However, growth in Google Cloud revenue slowed compared to the same period last year as customers tightened spending.
Alphabet reported that Google Cloud's revenue for the fourth quarter was $9.192 billion, slightly above analysts' expectations of $8.9 billion. This marks a 25.7% increase in Google Cloud revenue growth from the previous quarter but lower than the 32% growth rate from the same period last year. In comparison, Microsoft reported on Tuesday that Azure cloud service revenue grew by 30%.
Alphabet CEO Sundar Pichai noted that the growth in Google Cloud revenue in the fourth quarter was partly driven by generative artificial intelligence.
Pichai said, "We are pleased with the continued strong growth in our search business, as well as the contributions from YouTube and cloud computing. These businesses have all benefited from our investments in artificial intelligence and innovation."
In December of last year, Google launched Gemini, its most powerful artificial intelligence model to date, and plans to license it to customers through Google Cloud for use in their own applications.
Google also struck a deal worth up to $2 billion with the highly anticipated artificial intelligence startup Anthropic, which is competing for customers from Microsoft and Amazon. Google will also distribute Gemini to advertisers, ensuring a steady flow of funds into Google's search business.
Pichai continues to focus on investments in artificial intelligence, integrating new generative AI tools into more key products. To achieve this goal, Pichai stated that the company must make layoffs elsewhere, meaning more staff reductions on top of the 12,000 layoffs last year.
Alphabet stated that as a result of last year's series of layoffs, the company incurred total severance and related expenses of $2.1 billion in 2023.
As investors continue to pour into tech stocks, Alphabet's stock price surged to record levels last week, rising by 56% over the past year. (Chen Chen)
