Alphabet Falls Short on Earnings But ‘Excited by the AI-driven Leaps We’re About to Unveil’

“Our long-term investments in deep computer science make us extremely well-positioned as AI reaches an inflection point,” said CEO Sundar Pichai.

Image: Pawel Czerwinski

Google’s parent company Alphabet has announced earnings that fell short of expectations on revenue and earnings per share, with advertising declining year-over-year.

The company reported fiscal fourth-quarter total revenue of $76.05 billion, up from $75.3 billion a year ago. Earnings were $13.62 billion, or $1.05 per share, compared with $20.64 billion, or $1.53 per share, last year. Alphabet’s revenue, minus traffic-acquisition costs (TAC), was $63.12 billion, vs. $61.9 billion a year ago.

“We’re on an important journey to re-engineer our cost structure in a durable way and to build financially sustainable, vibrant, growing businesses across Alphabet,” said Chief Executive Sundar Pichai said in a statement announcing the results. The company has scaled back its hiring and recently announced 12,000 layoffs.


 

Google’s overall advertising sales dropped to $59 billion from $61.2 billion a year ago, missing expectations of $60.44 billion. Google Cloud brought in $7.32 billion, compared with $5.54 billion last year, while YouTube ad sales fell to $7.96 billion from $8.63 billion a year ago.

Alphabet shares were up 7% in Thursday’s regular session but currently are down 4.5% in after-hours trading.

Looking ahead Pichai sounded a positive note citing “great momentum in Cloud, YouTube subscriptions, and our Pixel devices.”

Alphabet and AI

Leading off the earnings report statement, Pichai touched on the company’s AI offering. This comes after recent reports of platforms like ChatGPT and DALL-E being a threat to its business. The creator of Gmail was quoted in media reports recently saying that Google is ‘only a year or two away from total disruption’ because of AI like ChatGPT.


 

According to a report earlier this week by CNBC, Google is testing an AI chatbot called “Apprentice Bard,” which, like ChatGPT, offers responses to questions posed using natural language. The company is also reportedly testing new search page designs that integrate the chat technology.

In the earnings report statement, Pichai said: “Our long-term investments in deep computer science make us extremely well-positioned as AI reaches an inflection point, and I’m excited by the AI-driven leaps we’re about to unveil in Search and beyond.”

Additionally signaling the importance of AI, Alphabet said in its Q4 earnings press release that it will begin disclosing investments in AI.

Previously its DeepMind AI research division was reported within the “Other Bets” category. It will now be reported as part of the company’s corporate costs, reflecting its increasing use across the company in platforms like Google Services and Google Clouds.

“As AI is critical to delivering our mission of bringing our breakthrough innovations into the real world, beginning in January 2023, we will update our segment reporting relating to certain of Alphabet’s AI activities,” the company said adding that the move reflects “its increasing collaboration with Google Services, Google Cloud, and Other Bets.”

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Bobby McGill

Bobby is the founder and publisher of Branding in Asia.

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