[ad_1]
Alphabet Inc. (NASDAQ: GOOGL, GOOG), the company that owns internet search giant Google, last week reported weaker-than-expected quarterly results for the fourth consecutive year amid economic uncertainty and a general reduction in ad spending.
Alphabet shares were flat after the earnings announcement but declined later, in a sign that the market was disappointed by the poor results. At the same time, stocks have become more affordable, from an investment perspective. Low valuations have created a rare opportunity to buy these blue-chip stocks for the long term, although the decline will continue this year if the company’s cautious short-term outlook is any indication.
Alphabet Inc. Q4 2022 Earnings Call Transcript
Revenues for the fast-growing cloud business also fell short of estimates, reflecting a widespread slowdown in the tech industry. That’s expected because the performance of competitors’ cloud segments was also weak in the most recent quarter.
Restructuring
Alphabet recently announced major workforce reductions, as part of an organizational restructuring, joining other tech giants like Meta Platforms, Inc. (NASDAQ: META ) and Amazon.com Inc (NASDAQ: AMZN ). The move suggests there will be job cuts in the coming months, as the company struggles with falling advertising demand and intense regulatory scrutiny. Meanwhile, hiring activity has increased in the technology industry, suggesting that the current slowdown in the situation is temporary and that business will return to pre-crisis levels any time soon.
Alphabet’s subscription business is growing, with YouTube Music and Premium crossing 80 million subscribers. But efforts are needed to better monetize the service, given its weaker-than-expected performance in Q4. The most promising non-core business is Google Cloud, which grew 32% in the most recent quarter. A differentiated portfolio must continue to drive customer momentum, powered by real-time data analytics and AI. Continued investment in technical infrastructure and ongoing initiatives to strengthen the portfolio, such as improving the ecosystem of YouTube creators, improve long-term business prospects.
Low Q4
Fourth-quarter revenue and profit missed analysts’ forecasts, as they have done in each of the last three quarters. While the top line rose 1% to about $76 billion, earnings fell 31% to $1.05 per share. The weakness is more pronounced in markets outside America. Advertising revenue, which accounts for about 90% of total service revenue, fell 4%.
Going forward, the bottom line will be negatively impacted by severance costs from workforce reductions and real estate-related costs. Additionally, corporate spending on digital advertising and cloud services won’t recover until next year.
MSFT earnings: Microsoft’s Q2 profit falls amid weak revenue growth
“In the first quarter of 2023, we expect costs of approximately $500 million related to the exit of leases to align office space with the adjusted global headcount view. This will be reflected in the company’s expenses. We will continue to optimize our real estate footprint. Return to capital spending. For 2023, we expect total capital spending to be generally in line with 2022, with an increase in technical infrastructure rather than a decrease in office facilities,” said CFO Alphabet Ruth Porat.
Alphabet shares took a jolt after last week’s earnings report and have continued to decline since then. Earlier, it has entered the new fiscal year on a positive note and has gained around 18% so far.
[ad_2]
Source link