Alphabet’s ad revenue misses expectations, sending stock price down

Google parent company Alphabet (Google, Google) reported fourth-quarter earnings after the close on Tuesday that missed analysts’ expectations for advertising revenue, the core of the tech giant’s business.

The stock fell 4% in after-hours trading.

Third-quarter revenue excluding traffic acquisition costs was $72 billion, compared with expectations of nearly $71 billion. That’s up from the company’s $63.12 billion in the same period last year. But investors appear to be focusing on advertising missteps.

The company reported continued growth in its cloud business, which has become increasingly important to investors due to its utility in artificial intelligence development. Google Cloud revenue exceeded expectations, exceeding US$9 billion, a year-on-year increase of more than 20%.

Here are some of Alphabet’s most important metrics, compared to Wall Street expectations for the company’s fiscal fourth quarter, according to Bloomberg data:

  • Revenue (excluding traffic acquisition costs): $72.32 billion, expected to be $70.97 billion ($63.12 billion in the fourth quarter of 2022)

  • Adjusted EPS: $1.64 vs. $1.59 expected ($1.05 Q4 2022)

  • Cloud revenue: $9.19 billion, $8.95 billion expected ($7.32 billion in Q4 2022)

  • Advertising revenue: $65.5 billion, $65.8 billion expected ($59.04 billion in Q4 2022)

Google CEO Sundar Pichai said in the company’s earnings report: “We are pleased with our continued strength in search and the growing contributions of YouTube and cloud computing. Each of these has benefited from our artificial intelligence benefit from investment and innovation.”

The earnings report comes just weeks after Google laid off hundreds of employees across multiple divisions as the company aimed to cut expenses and focus on growth areas including artificial intelligence. The tech giant joins several peers and other companies in corporate America, Rely on layoffs to improve efficiency This comes after significant expansion in the COVID era.

Last year, it was widely believed that Google was catching up to Microsoft (Microsoft Corporation), one of the first companies in the tech world to get excited about the culture of consumer AI chatbots. Microsoft has invested in OpenAI, the company behind the popular chatbot ChatGPT.

The company has been trying to gain more market share in the cloud computing market, where it currently ranks third behind West Coast rival Amazon.Amazon) and Microsoft.

Hamza Shaban is a reporter covering markets and economics at Yahoo Finance. Follow Hamza on Twitter @hshaban.

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