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Alphabet narrowly missed expectations for growth in its advertising business, sending its stock down as much as 5.5% in after-hours trading, overshadowing what had been a strong final quarter of the year.
The tech giant said Tuesday that its advertising revenue rose 11% to $65.5 billion in the fourth quarter of 2023, slightly below analysts’ consensus estimate of $66 billion. YouTube’s ad revenue increased by almost 20% to $9.2 billion as his daily views reached his 70 billion.
Advertising revenue accounts for nearly 80% of Alphabet’s revenue. The business has returned to growth over the past three quarters as business confidence improved following clear signals from the Federal Reserve that interest rates have peaked and could be cut as early as March. Ta.
In other sectors, Alphabet reported a strong final quarter of 2023. Overall sales rose 13.5% to $86.3 billion, beating analysts’ expectations of $85.3 billion.
Faster-than-expected growth in Alphabet’s Google Cloud services business boosted results, with revenue up 26% year over year to $9.2 billion.
Capital spending rose 45% to $11 billion in the fourth quarter, with Alphabet expected to spend more in 2024 as it invests in servers, data centers and other technology infrastructure to build out artificial intelligence products, particularly advertising and cloud. “will grow significantly,” he said. Service business.
Later this year, Google plans to roll out Gemini Ultra, the most advanced upgrade to its generative AI chatbot Bard. The company continues to transition to AI-driven ad formats with the aim of improving return on investment for advertising customers. Google also began integrating its Google Brain and DeepMind teams in April to accelerate AI progress.
Sundar Pichai, CEO of Alphabet, said: Each of these is already benefiting from AI investment and innovation. As we enter the Age of Gemini, the best is yet to come. ”
Google Cloud will be a key growth driver for Alphabet as demand for generative AI increases. The strong performance in the fourth quarter marked an improvement from the previous quarter, when the division missed its revenue targets.
The group reported profit after tax of $20.7 billion for the quarter, an increase of 50% from the same period last year. Earnings per share increased from $1.55 in the previous quarter to $1.64, marking the third consecutive quarter of EPS growth. For the full year, sales increased 22% to $307.0 billion, and net income increased 23% to $73.8 billion.
Alphabet shares hit a record high this month, following a broad rally in tech stocks. But investors believe Google could close the gap with Microsoft by developing commercial generative AI models and integrating the technology into its own cloud services and search products that compete with AI advances made by Microsoft’s Copilot. I’m keeping an eye on the signs that it’s possible.
Pichai said Google is also “experimenting” applying Gemini-generated AI to its search business. “AI gives us opportunities on the organic side and the monetization side, but we are still in its early stages,” he said. “Over the long term, we will be able to address information needs in a deeper way, and we’re very excited about what’s ahead.”
Microsoft has jumped ahead of big tech companies in the generative AI arms race, investing $13 billion in ChatGPT maker OpenAI last year and overtaking Apple this month to become the world’s largest company by market capitalization.
Google laid off 12,000 employees, about 6% of Alphabet’s workforce, early last year. Hundreds more layoffs have been made so far this year, as Google aims to reverse a pandemic-induced hiring surge, rein in spending and redirect resources to developing AI systems. warns to expect further cuts.
Alphabet announced Tuesday that it has earmarked $2.1 billion in employee severance benefits for 2023. The company also announced a $3 billion severance charge related to office space reductions during the year.