Late Tuesday evening NST, Google owner Alphabet released its first-quarter figures — the giant’s turnover is $69.8 billion, up from $68 billion last year.
Analysts, however, estimated sales of $68.9 billion in the first quarter, so Alphabet made a rally.
In aftermarket trading, Alphabet stock rose 4.3 percent after the numbers were released.
Turnover indicates growth of three percent — a far cry from the 13 to 30 percent growth rate the company has seen from year to year in recent years.
Revenue growth has slowed for several consecutive quarters, as companies have tightened their use of online advertising to contain cost growth. In addition to Alphabet, this also affected Meta and Snap, among others, to a greater extent.
On top of that, the company reported a total profit before tax of $18.2 billion, which is somewhat lower than last year’s $18.9 billion. Up front, a pre-tax profit of $16.5 billion was expected.
Among the highlights of the quarterly report was the company’s announcement of a $70 billion share buyback.
Double advertising revenue
Google is by far the most important part of the Alphabet group, and Google advertising is by far its biggest source of revenue — although the company has been trying to make itself less dependent on ad sales for several years.
In the quarterly report, it appears that advertising revenues decreased somewhat, for the second quarter in a row: in total, from $54.7 billion in the first quarter of last year, to $54.6 billion for the same period of the current year.
The decline is greatest in the Google Network segment, but ad revenue from YouTube is also declining.
The Google Cloud area, which deals, among other things, with cloud storage, stands out as an area with a strong revenue growth rate: from $5.8 billion in the first quarter of last year to $7.5 billion in the same period this year.
This corresponds to a growth of about 30 percent. Revenue growth means that Google Cloud is profitable for the first time.
An important figure that investors are following closely is the so-called TAC, or Traffic Acquisition Costs, in other words what Google pays affiliates and internet companies to drive traffic to their websites.
TAC is a big spend item for search engines, and Google’s TAC ended at $11.7 billion in the first quarter. By comparison, financial firm StreetAcount projected the TAC to be $11.8 billion, a cost in the same period last year of $11.9 billion.
Cost reduction and artificial intelligence
Some of the remaining news from the first quarter on Alphabet’s side are widespread layoffs and cost cuts. Construction projects have been put on hold, while the company announced in January that it would cut 12,000 jobs – the equivalent of six percent of the company’s workforce.
In the quarterly report, it also appears that Alphabet had more than 190,000 employees at the end of the first quarter, nearly 30,000 more than in the same period last year. Alphabet writes that the job cuts will mainly only show up in the second quarter report.
In keeping with the first quarter, the amount of progress AI development has made — OpenAI’s Chat GPT has taken the world by storm — and Alphabet is down with its pants.
When Alphabet was about to introduce Bard, the company’s answer to Chat GPT, it gave incomplete and bad answers directly during a presentation to the public and market which sent the stock down eight percent that evening.
It also marked the lowest level for Alphabet’s share so far this year, and since then the share has risen less than 19 percent.
The Bard Project was made available to a few Google users a month ago, but it’s still not open to everyone.
– We are satisfied with the company’s performance in the first quarter, as the search business performed well, while the momentum was noted in the cloud services business. We delivered important product updates related to artificial intelligence and deep machine learning, CEO Sundar Pichai sums up in a press release.(conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We’d like you to share our statuses using links that lead directly to our pages. Reproduction or other use of all or part of the Content may be made only with written permission or as permitted by law. For more terms see here.
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