What you need to know
- Alphabet's Q4 earnings report shows a full-year revenue of $307 billion, a 9% increase from 2022
- YouTube’s ad revenue in Q4 was $9.2 billion, while Google Cloud’s revenue was $9.1 billion at the end of 2023.
- Despite positive figures analysts feel that this report is a big warning sign for ad-dependent companies
Google’s parent company, Alphabet, released its earnings report for Q4 and fiscal year 2023, which concluded at the end of December. The year-end call focused on Google’s investments in AI, including how it's helping search and subscriptions reach $15 billion in annual revenue since 2019.
"Last year brought new excitement around Gen AI," said CEO Sundar Pichai.
The company reported full-year revenue of $307 billion, up by 9% compared to 2022, which added 25 billion to revenues for the year.
Alphabet's President and Chief Investment Officer, Ruth Porat, said, "we ended with a strong fourth quarter with consolidated revenues."
The Q4 revenue was around $83.3 billion, which was slightly above what analysts had predicted, according to CNBC. The increase in revenue marks a 13% YoY (year-over-year) increase for the company.
Porat went through each aspect of the earnings report and said that Google Search remained the largest contributor to revenue growth.
Q4 earnings reported that subscriptions are growing strongly powered by YouTube Premium and music, YouTube TV, and Google one.
“YouTube is the key driver of our subscription revenues available in over 100 countries and regions YouTube music and premium have real momentum. They're engaging passionate users and driving great returns for the music industry and creators,” said CEO Sundar Pichai.
“We are pleased with the ongoing strength in Search and the growing contribution from YouTube and Cloud,” said Pichai.
YouTube’s ad revenue was $9.2 billion compared to 2022 (7.96 billion), while Google Cloud’s revenue was $9.1 billion at the end of 2023.
Even though Google advertising, search, and other revenues grew 13% yearly, senior analyst Thomas Monteiro at Investing.com felt these numbers were disappointing.
"Alphabet's ad revenue numbers suggest that corporations worldwide are still uncertain about the pace of interest rate cuts from global central banks, thus keeping some powder dry while waiting for more clues before opening their wallets,” Monteiro added.
The company’s subscriptions, platforms, and devices revenues, which were previously referred to as ‘other revenues’ were 10.8 billion, which was up by 23%, primarily reflecting growth in YouTube subscription revenues
Google has announced numerous layoffs in early 2023 and January 2024, impacting the augmented reality (AR) hardware, Google Assistant, and core engineering divisions.
On the earnings call, Porat hinted at more layoffs and a slower hiring pace in the near future as they continue to focus on “removing layers to simplify execution and drive velocity.”
Porat said the employee severance and related charges of $2.1 billion for the twelve months ended December 31, 2023.
“At this point in the quarter, we do estimate that severance-related expenses will be roughly 700 million in the first quarter as we've continued these efforts,” Porat added.
Google’s generative AI remained the focus of the Q4 earnings call with Pichai calling this year the ‘Gemini Era.’
“Gemini Ultra is coming soon.”
“The team is already working on the next versions and bringing it to our products that start with search.”
“We are already experimenting with Gemini in search, which is making our search and rate of experience faster for users,” Pichai added.
