Alphabet, the parent company of Google and YouTube, disappointed on Thursday with revenue slipping slightly to $76 billion in the fourth quarter of 2022 as the tech giants appear to be entering the era of austerity after laying off thousands of people.
• Also read: Amazon beats expectations with fourth-quarter sales of more than $149 billion
Net income came in below analysts’ forecasts at $13.6 billion, compared with $20.6 billion last year, according to the results release.
The world’s number one online advertising title fell more than 4% in e-commerce after the close.
“It is clear that the macroeconomic climate has become more complicated after a period of significant acceleration in digital spending during the pandemic,” Sundar Pichai admitted to analysts at the start of the conference call.
The Californian group’s advertising revenue has fallen exceptionally over the course of a year: $59 billion for Google (-3.6%) and less than $8 billion for YouTube (-7.8%).
Cloud activity (remote computing) generated revenue of $7.3 billion, below expectations.
Ten days ago, in the wake of Amazon, Meta and Microsoft, Alphabet announced a large-scale redundancy plan: Around 12,000 jobs are to be cut worldwide, which is just over 6% of the total workforce.
“Precarious situation”
“Google is in a precarious position,” commented Insider Intelligence’s Evelyn Mitchell. “Recent layoffs are a clear sign that its earnings are thin.”
The analyst points out that markets are particularly interested in YouTube, “whose ad revenue fell for the first time in the third quarter.”
The video platform faces competition from long formats with streaming services like Netflix and short and immersive formats imposed by the very popular TikTok. It’s also had to adapt to Apple’s regulatory changes that limit its ability to collect data to sell targeted advertising.
“Even search engine advertising and cloud services (…), Alphabet’s financial pillars, are suffering from competition from Amazon (which is beginning to eat up market share in digital advertising) and poor economic conditions, adds Evelyn Mitchell.
She estimates that Google will generate more than $180 billion in advertising revenue by 2023, capturing 28.8% of the global market.
” Vacuum “
Snap (Snapchat) and Meta (Facebook, Instagram) had already announced the color with their quarterly results published on Tuesday and Wednesday: the two companies are still attracting more users, but their profits are collapsing.
Snapchat now has 375 million daily users — up 17% from late 2021 — who are spending increasing amounts of time interacting, according to the mobile app. But the company suffered a net loss of $288 million compared to a net income of $23 million a year ago.
As for Meta, its earnings for the crucial holiday season halved to $4.65 billion. And in 2022, ad revenue fell for the first time since the social media giant went public in 2012.
But the market was reassured by better-than-expected results and promises of sobriety from Mark Zuckerberg, the company’s chief executive.
He wants 2023 to be “the year of efficiency,” and clarified during Wednesday’s conference call with analysts that Meta “wants to remove certain tiers, certain intermediate positions in management to speed up decision-making.”
Wedbush analyst Dan Ives says layoffs in the tech industry will “accelerate to reduce spending”, digital advertising will remain “under pressure” and companies “will exercise caution in their forecasts for the year.”
Warning, this cost Microsoft points last week.
The market was disappointed that the IT group expects sales of between 50.5 and 51.5 billion US dollars due to weaker demand for personal computers compared to 2022. And cloud growth is expected to continue to slow after years of unbridled growth.