Google owner Alphabet on Tuesday night reported pre-tax earnings of $21.2 billion on revenue of $76.7 billion in the third quarter. This corresponds to 11 percent year-over-year revenue growth and marks the first time since 2022 that the tech giant has achieved double-digit top-line growth.
It had previously expected pre-tax earnings of $21.9 billion and a top line of $75.5 billion, according to Bloomberg estimates.
In a press release, CEO Sundar Pichai highlighted the progress the company has made in its AI products, and promised that there will be more to come.
– The fundamental strength of our company was clearly visible in the quarter, driven by strong growth in search engines and YouTube, as well as good agility of cloud services, says CFO Ruth Porat.
Despite a return to double-digit overall growth, Alphabet shares fell more than five percent in after-hours trading on Wall Street. According to Bloomberg, the decline can be attributed to weak revenues and results for Google Cloud, which is considered the tech giant’s next growth rocket.
Revenues of $8.6 billion and operating profits of $433 million were expected in advance. The result was revenues of $8.4 billion and operating profits of $266 million.
The Google owner is the third-largest player in cloud services after Amazon and Microsoft.
As a result of the extensive downsizing operations announced by the company earlier this year, costs related to these operations are now being disclosed, amounting to $2.1 billion so far this year. Costs related to canceled leases amounting to $649 million so far this year were also revealed.
“We may have to book additional costs in the future as we evaluate our housing needs,” the letter says, referring to “improving the company’s office buildings around the world.”
Along with the other six US tech giants, Alphabet has so far in 2023 consolidated its dominant position in the global stock market. The company that owns Google is up more than 50 percent on the stock market this year, and its collaboration with Tesla, Microsoft, Meta, Apple, Nvidia and Amazon alone has ensured that the MSCI All-Country Index is in a positive position for the year.
The group, which earned the nickname “The Magnificent 7,” also kept Wall Street’s S&P 500 above water for large parts of the year. In the market, AI has been a key part of the narrative. The seven have thrown themselves into the “AI arms race” that has been the talk of the stock market in recent months — and one that has rewarded giant corporate investors in the form of strong stock market increases.
After what should be called a successful launch of OpenAI’s ChatGPT software last year, Alphabet has begun the task of integrating the use of generative AI into its products, including in its search engine and in other parts of the business.
Price increases have also contributed to the fact that US companies now make up 61 percent of the global index, and 2023 is set to be the eighth year in the last 10 in which US companies’ share of global market capitalization rises, he writes. Financial Times.
According to analysts who follow Alphabet, there is still no shortage of further upside. On average, analysts set a price target of $153 per share, versus today’s level of $139. There are 54 buy recommendations, eight “hold” recommendations and no one believes the stock should be sold.
The stock market sunshine story has cast a certain shadow over the fact that Alphabet, like other tech giants, underwent significant rounds of downsizing in 2023.
In January, Google announced that it would cut 12,000 jobs, or about six percent of the total.
In the third quarter, several hundred jobs were cut in the hiring division, in addition to more job cuts at Waymo and in the news division, he writes. CNBC.
Until Q3, persistent inflation, combined with declining advertising revenues and increased competition with Tiktok, meant that the last four quarters before that ended with single-digit annual growth on the top line.
During the third quarter, the US Department of Justice also initiated proceedings against Google, based on its dominant position in the search engine space.
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