Google's parent company's net profit in the fourth quarter was $13.624 billion, down 34% year-on-year

Tencent Technology News News on February 3, Google's parent company Alphabet released the company's fourth quarter 2022 earnings report after hours on Thursday. According to the financial report, Alphabet's fourth-quarter revenue was $76.048 billion, an increase of 1% over the same period last year; Net income was US$13,624 million, down 34% from US$20,642 million in the year-ago quarter.

Focus:

• 1Alphabet's total revenue in the fourth quarter was $76.048 billion, up 1% from $75.325 billion in the same period last year and less than Wall Street's estimate of $76.53 billion.
• 2 According to GAAP, Alphabet's fourth-quarter operating profit was $18.160 billion, and the operating margin was 24%; Alphabet's operating profit in the same period last year was $21.885 billion, with an operating margin of 29%.
• 3 According to US GAAP, Alphabet's fourth-quarter net profit was $13.624 billion, down 34% from $20.642 billion in the same period last year.

First, the revenue profit is not as good as Wall Street's expectations

1. Revenue fell short of Wall Street expectations

Alphabet's total revenue in the fourth quarter was $76.048 billion, up 1% from $75.325 billion in the same period last year and less than Wall Street's forecast of $76.53 billion.

By geography, Alphabet's revenue from Europe, the Middle East and Africa in the fourth quarter was $21.762 billion, down 6% from $23.153 billion in the same period last year; Asia Pacific revenue was $11,979 million, down 6% from $12,732 million in the year-ago quarter. Revenue from the rest of the Americas was $4,656 million, up 5% from $4,447 million in the year-ago quarter. Revenue from the U.S. was $36,982 million, up 6% from $34,790 million in the year-ago quarter.

2. Net profit fell short of Wall Street expectations

According to US GAAP, Alphabet's fourth-quarter net profit was $13.624 billion, down 34% from $20.642 billion in the same period last year.

On a GAAP basis, Alphabet's diluted earnings per share of Class A, Class B and Class C common stock (including the impact of net income or net loss from discontinued operations) for the fourth quarter were $1.05, compared to $1.53 per share of Class A, B and Class C common stock in the year-ago quarter, below Wall Street's estimate of $1.18.

3. Executive reviews

Sandel Pichai, CEO of Alphabet and Google, said: "As AI reaches an inflection point, our long-term investment in deep computer science puts us in a very good position, and I'm excited about the AI-driven leap we're about to roll out in search and beyond." The cloud, YouTube subscriptions, and our Pixel devices also have a lot of momentum. We are embarking on an important journey to redesign our cost structure in a lasting way and build a financially sustainable, vibrant, growing business across Alphabet. ”

Ruth Borat, chief financial officer of Alphabet and Google, said: "Our consolidated revenue for the fourth quarter was $76 billion, up 1% year-over-year and up 7% in constant currency; For the full year 2022, it was $283 billion, up 10% and up 14% in constant currency. We are doing a lot of work to improve all aspects of our cost structure to support our investments in the highest growth priorities for long-term profitable growth. ”

2. Financial Summary

1. Google services revenue declined year-over-year

Google Services fourth-quarter revenue was $67.838 billion, less than $69.400 billion in the same period last year.

Google Services' total advertising revenue in the fourth quarter was $59.042 billion, less than the $61.239 billion in the same period last year. Among them, Google search and other revenue was $42.604 billion, less than the $43.301 billion in the same period last year; YouTube advertising revenue was $7.963 billion, less than $8.633 billion in the same period last year; and Google web revenue was $8.475 billion, less than $9.305 billion in the same period last year.

Other Google Services revenue for the fourth quarter was $8.796 billion, up from $8.161 billion in the year-ago quarter.

Google Cloud's fourth-quarter revenue was $7.315 billion, up from $5.541 billion in the year-ago quarter.

Other fourth-quarter revenue was $226 million, up from $181 million in the year-ago quarter.

2. Profit declined year-on-year

According to US GAAP, Alphabet's fourth-quarter operating profit was $18.160 billion, with an operating margin of 24%; Alphabet's operating profit in the same period last year was $21.885 billion, with an operating margin of 29%. Among them, Google Services' operating profit in the fourth quarter was $21.101 billion, less than the $25.993 billion in the same period last year; Google Cloud operating loss was $480 million, compared with an operating loss of $890 million in the same period last year; and other business operating loss was $1.631 billion, compared with an operating loss of $1.450 billion in the same period last year.

According to US GAAP, Alphabet's fourth-quarter net profit was $13.624 billion, down 34% from $20.642 billion in the same period last year.

On a GAAP basis, Alphabet's diluted earnings per share of Class A, Class B and Class C common stock (including the impact of net income or net loss from discontinued operations) for the fourth quarter were $1.05, compared to $1.53 per share of Class A, B and Class C common stock in the year-ago quarter, below Wall Street's estimate of $1.18.

3. Cash reserves declined year-on-year

As of December 31, 2022, Alphabet's total cash and cash equivalents on its books were $21,879 million, up slightly from $20,945 million in the year-ago quarter, and marketable securities totaled $91,883 million, down from $118,704 million in the year-ago quarter. Exhibit's holdings of cash, cash equivalents and marketable securities totaled $113.763 billion, down from $139.649 billion in the same period last year.

3. Other financial and operational highlights

Alphabet's total costs and expenses in the fourth quarter were $57.888 billion, up from $53.440 billion in the same period last year. Among them, the cost of revenue was $35.342 billion, up from $32.988 billion in the same period last year; R&D expenses were $10.267 billion, up from $8.708 billion in the same period last year; sales and marketing expenses were $7.183 billion, down from $7.604 billion in the same period last year; and general and administrative expenses were $5.096 billion, up from $4.140 billion in the same period last year.

As of December 31, 2022, Alphabet had 190,234 employees worldwide, compared to 156,500 as of December 31, 2021.

4. Financial data for 2022

Alphabet's total revenue in 2022 was $282.836 billion, up 10% from $257.637 billion in the same period last year.

Alphabet's total costs and expenses in 2022 were $207.994 billion, up from $178.923 billion in the same period last year. Among them, the cost of revenue was 126.203 billion US dollars, up from 110.939 billion US dollars in the same period last year; R&D expenses were 39.500 billion US dollars, up from 31.562 billion US dollars in the same period last year; sales and marketing expenses were 26.567 billion US dollars, up from 22.912 billion US dollars in the same period last year; and general affairs and administrative expenses were 15.724 billion US dollars, up from 13.510 billion US dollars in the same period last year.

According to US GAAP, Alphabet's operating profit in 2022 was $74.842 billion, with an operating margin of 26%; Alphabet's operating profit in the same period last year was $78.714 billion, with an operating margin of 31%.

According to US GAAP, Alphabet's net profit in 2022 was $59.972 billion, less than the $76.033 billion in the same period last year.

On a GAAP basis, Alphabet's 2022 diluted earnings per share of Class A, B and Class C common stock, including the impact of net income or net loss from discontinued operations, was $4.56, compared to $5.61 per share of Class A, B and Class C common stock in the year-ago quarter.

5. Impact of layoffs

In January 2023, Alphabet announced that it would cut about 12,000 employees. The company expects this round of layoffs to generate $1.9 billion to $2.3 billion in employee severance pay and related expenses, most of which will be recognized in the first quarter of 2023.

In addition, Alphabet is taking steps to optimize its global office space. As a result, exit costs related to office space downsizing are expected to be approximately $500 million in the first quarter of 2023. As Alphabet further assesses real estate needs, it is expected that additional costs may be incurred in the future.

6. Stock price performance

Alphabet shares rose $7.31, or 7.28 percent, to close at $107.74 in regular trading on the Nasdaq stock market on Thursday. In subsequent after-hours trading, the company's shares fell $3.49, or 3.24%, to $104.25 at press time, as the performance fell short of market expectations. Over the past 52 weeks, Alphabet's share price has been trading at a low of $83.34 and a maximum of $149.68. Based on Thursday's closing price, Alphabet's market value is about $1,394.5 billion. (Mowgli)