Alphabet Earnings: Google Parent Stock Slides Despite Profit, Sales ...

24 Oct 2023

Forbes

Topline

Google parent Alphabet topped headline forecasts in its third quarter earnings report Monday, with digital advertising revenue proving robust as advertisers loosened their belts on spending despite economic turbulence, though Wall Street proved unsatisfied with the seemingly stellar results.

Alphabet CEO Sundar Pichai speaks at the Google I/O conference in May.

AFP via Getty Images Key Facts

Alphabet brought in $1.55 earnings per share and $76.6 billion of sales during the three-month stretch ending September 30.

Analysts projected $1.46 earnings per share and $76 billion of revenue, according to FactSet.

Advertising accounted for some $59.6 billion of Q3 sales, including $44 billion of ad revenue in its core Google search business and $8 billion from YouTube; analysts forecasted $59.2 billion in total ad sales with $47.5 billion from search and $7.8 billion from YouTube.

The 9% annual growth in ad revenue comes after the Silicon Valley giant registered rare consecutive quarters of annual declines in Q4 2022 and Q1 2023, signaling companies are once again shelling out plenty of ad dollars despite macroeconomic headwinds.

But the company’s crucial cloud segment underperformed expectations, with the artificial intelligence-exposed unit relied upon for growth registering quarterly sales and profit of $8.4 billion and $266 million, respectively, falling short of analyst forecasts of $8.6 billion and $324 million.

Shares of Alphabet sank about 5% to just above $130, a stark contrast to rival Microsoft’s post-earnings boost Tuesday thanks in part to its cloud business topping analyst estimates.

Key Background

A member of the “magnificent seven” tech stocks riding artificial intelligence optimism to massive gains, Alphabet has enjoyed a more than 50% share price rally this year. Alphabet stock initially staggered amid concerns about how the Microsoft-backed ChatGPT would impact Google’s market share dominance Microsoft and a poorly received launch of its own generative AI program. But after consecutive strong earnings reports, Alphabet largely convinced investors it would not be a “casualty” of the AI boom but rather a benefactor.

Surprising Fact

Alphabet, which celebrated its 25th birthday last month, is in the middle of a high-stakes antitrust lawsuit from the Department of Justice.

Big Number

4%. That’s how much Alphabet has cut its global workforce in 2023, shrinking from a 190,234 headcount at the end of 2022 to 182.381 at the end of Q3 as numerous massive tech firms shed jobs to cut costs.