Google’s parent company fell short of Wall Street expectations, though Google Cloud bucked the trend
Google parent company Alphabet reported earnings and revenue weaker than Wall Street analysts expected, driving the stock price down in after-hours trading on Tuesday. Alphabet reported earnings per share (EPS) of $1.06; consensus estimates expected EPS closer to $1.25. Alphabet reported revenue of $69.09 billion, versus the $70.58 billion of some analysts. Advertising revenue associated with YouTube missed expectations as well — $7.07 billion, versus about $7.42 billion from some analysts.
“Our Q4 headcount additions will be significantly lower than Q3. And as we plan for 2023, we’ll continue to make important trade-offs where needed and are focused on moderating operating expense growth,” said Alphabet CEO Sundar Pichai, during the company’s call with analysts following the earnings news.
Pichai compared his company’s current efforts to invest in Artificial Intelligence (AI) and deep computer science as similar to what Google did more than a decade ago, but that time for mobile computing. He said that Alphabet was “sharpening our focus on a clear set of product and business priorities,” moving away from lower priority efforts to areas projected to see higher growth.
“Throughout Google’s history, periods of dedicated focus have enabled us to emerge strongly and unleash new areas of computing innovation,” Pichai said, adding that Google’s current focus on AI means “that we can deliver a wide range of breakthroughs across our products and services to help people, businesses, and communities.”
Pichai emphasized the continued importance of Google Cloud to the company’s bottom line.
“We see continued momentum with Q3 revenue of $6.9 billion with Google Cloud Platform’s revenue growth rate above the aggregate,” he said. Google Cloud’s revenue mildly beat Wall Street expectations by $200 million or so.
Alphabet added 2,600 employees to the Google Cloud roster in September when it closed its acquisition of cybersecurity firm Mandiant, Pichai noted. “With Mandiant, we add industry-leading threat intelligence and incident response capabilities to help customers stay protected at every stage of the security life cycle,” he said.
Alphabet SVP and Chief Business Officer Philipp Schindler offered additional details during Alphabet’s call with analysts. Google and YouTube saw lower ad revenue thanks to a pullback from insurance, loan, mortgage, and cryptocurrency advertisers, he said.
“There’s no question we’re operating in an uncertain environment,” said Schindler.
Alphabet CFO Ruth Porat said that Google Cloud Platform (GCP) growth exceeded Google Cloud’s, which reflected “significant growth in both infrastructure and platform services.” Google Cloud lost $699 million for the quarter, although the $6.9 billion in revenue still reflected 38% year-over-year growth.
In July, Alphabet posted second-quarter earnings that also missed Wall Street estimates. The company reported $69.69 billion in revenue, 13% higher year over year, mostly in line with estimates. Net income was $16 billion, or $1.21 per share, lower than the $1.27 estimate predicted. Operating income was $19.4 billion, $1 billion short of Wall Street estimates.
“As we head into 2023, we are going to focus on our most important priorities as a company. To support our growth, we’ll continue to invest responsibly for the long term in a way that is responsive to the current economic environment. I want to thank our employees around the world for their contributions over the last quarter,” said Pichai.
