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Alphabet Shares Tumble as Google Ad Revenue Disappoints

Google Alphabet stock price declines

Key moments

  • Alphabet’s Q4 Revenue: $86.3 billion, up 13% YoY, surpassing Wall Street’s $85.3 billion forecast.
  • Earnings per Share: $1.64, beating the consensus of $1.59.
  • Google Cloud Revenue: $9.2 billion, up 26%, outpacing estimates of $8.9 billion.
  • Google Advertising: Totaling $65.5 billion, slightly below Wall Street expectations.
  • YouTube Advertising: Raking in $9.2 billion, meeting estimates.
  • Google Search and Other Advertising: $48.02 billion, just below the Wall Street.
  • Alphabet Stock: Dropped 5.9% in after-hours trading following the earnings report.

Google’s parent company, Alphabet, sent shockwaves through the financial markets as its shares plummeted in after-hours trading, despite the tech giant posting an overall impressive set of Q4 results. Let’s dive into the nitty-gritty of these numbers and analyze why Wall Street seems to be less than thrilled.

Google Alphabet stock declines

In a financial twist that left analysts scratching their heads, Alphabet reported Q4 revenue of a staggering $86.3 billion. This figure, representing a 13% year-over-year growth, comfortably exceeded the Wall Street consensus of $85.3 billion. Earnings per share, too, made an impressive showing, clocking in at $1.64—well ahead of the consensus estimate of $1.59 per share.

The star of the show was Google Cloud, which posted Q4 revenue of $9.2 billion, showcasing an outstanding 26% growth that handily surpassed the analysts’ estimates of $8.9 billion. In the advertising realm, Google raked in a hefty $65.5 billion, although this figure fell slightly short of Street expectations. YouTube advertising, generating a formidable $9.2 billion in revenue (up 16%), performed commendably and aligned perfectly with estimates. Meanwhile, Google Search and other advertising pulled in $48.02 billion, falling just shy of the Street consensus at $48.1 billion, albeit showing a robust 13% growth.

The less glamorous side of the story, however, revolves around “Google Network” ads, which saw revenue of $8.3 billion—a mere 2% decrease from the year-ago quarter and below estimates. In contrast, Alphabet’s “other bets” portfolio incurred a $863 million loss in Q4, although this was offset by Google Cloud’s impressive operating income of $864 million, reversing a $186 million loss from the previous year.

Capital expenditures were another focal point, surging from $8 billion in the September quarter to $11 billion in Q4, as Alphabet continues to pour resources into the realms of artificial intelligence and cloud infrastructure. Notably, the company signaled its intention to significantly ramp up capital spending in 2024 compared to 2023.

Sundar Pichai, Alphabet’s CEO, expressed optimism about the company’s future, asserting that Search, YouTube, and Cloud were already reaping the rewards of their AI investments and innovation. As he put it, “As we enter the Gemini era, the best is yet to come.”

Nevertheless, despite the impressive figures, Alphabet’s stock took a hit, plummeting 5.9% in late trading following the earnings report. It seems that, in the world of high expectations, even outperforming estimates may not be enough to satisfy the appetites of investors.

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