Alphabet (GOOGL) reported weaker-than-expected fourth-quarter results on Thursday night as a combination of foreign exchange headwinds and a slowdown in ad spend continues to plague the company. Total revenue of $76.05 billion represents a year-over-year increase of about 1%, or 7% in constant currency, but missed analysts’ estimates of $76.53 billion, according to Refinitiv. (Constant currencies help eliminate foreign currency fluctuations to provide a clearer financial picture.) Adjusted earnings per share fell more than 30% from a year ago, to $1.05 per share, below Wall Street consensus estimate of $1.18 per share. The bottom line This hasn’t been a great performance from Alphabet, but management’s call with investors reassured us of the way forward. While the discussion started with all the company is doing in the field of artificial intelligence — note that the private language model LaMDA will soon be released to the public for feedback — it quickly turned to a topic of primary concern to investors: cost discipline. The team says it will continue to invest in growth and the future — something we value as long-term investors. But it also plans to use a “sharpened focus” on building “financially sustainable” businesses and is growing company-wide. Consider: Management is working to improve the economics of Alphabet’s hardware division (such as Pixel smartphones), insists Google Cloud is on track to become profitable, and it continues to work on it. New ways to boost YouTube Shorts monetization. It took a while, but management seems to have gotten the message that we are no longer in a zero interest rate environment and that investors will not accept growth at any cost — especially when that growth is almost non-existent due to difficulty. operating environment. While efforts to slow the rate of increase in operating costs are underway, the group says the impact will become more apparent in 2024. Despite some concerns about the Department’s recent antitrust lawsuit Justice, we’re reiterating our 1 rating on the stock based on this clear plan to “re-engineer” the company’s cost structure. We are also satisfied with our $130 price target. In addition, the change in the useful life of servers and certain network equipment will be profitable as it will reduce depreciation costs on equipment in service at the end of fiscal year 2022. about $3.4 billion. This will provide an offset to the known obstacles that are hindering the company’s revenue performance (see more below). Results Management says as the AI models are refined, it will begin integrating them into Search. Alphabet is also working on and planning to launch AI-powered tools for developers, creators, and partners, as well as additional tools to bring AI applications to “enterprises and businesses.” organizations of all sizes”. At YouTube, the team noted that Shorts now averages 50 billion views per day, up from 30 billion in the previous quarter. Additionally, YouTube subscriptions (including Music and Premium) have surpassed 80 million (including trailers), and the addition of the NFL Sunday Ticket is expected to accelerate subscription growth. Alphabet spent $15.4 billion on share repurchases in the fourth quarter and ended the year with $114 billion in cash, cash equivalents and marketable securities on its balance sheet. Finally, we would like to note that after assessing the useful life of Alphabet’s servers and network equipment, the team will extend the useful life of some servers and network equipment. definitely up to six years. As a result, the depreciation associated with these assets, which are largely factored into revenue expenses and research and development (R&D) expenses, is expected to decline by approximately $3.4 billion during the year. 2023 for active assets as of the end of fiscal year 2022. While it’s a simple accounting change that has an impact on what’s considered a non-cash charge — a change we’ve seen before as companies work to extend the life of their hardware. through new software and architecture improvements — but it represents real cost savings as these assets eventually need to be replaced (requiring a cash outlay) and will help you reduce costs. That $3.4 billion drop may not be enough for investors to look past the drop in ad spend, but it does represent about 5% of Alphabet’s projected net income for 2023. , it should provide a decent offset to the revenue weakness as analysts revise their full-year earnings estimates. (Jim Cramer’s Charitable Trust goes by the long name GOOGL. See here for a full list of stocks.) As a subscriber to the CNBC Investment Club with Jim Cramer, you’ll receive trading alerts before Jim Cramer. conduct transaction. Jim waits 45 minutes after sending the trading notice before buying or selling shares in his charity’s portfolio. If Jim had talked about a stock on CNBC, he would have waited 72 hours after issuing a trading warning before taking a trade. INFORMATION ABOUT THE ABOVE INVESTMENT CLUB IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, PLUS OUR DISCLAIMER. 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Sundar Pichai, CEO of Google Inc. spoke during an event in New Delhi on December 19, 2022.
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Alphabet (GOOGL) reported lower-than-expected fourth-quarter results on Thursday night as a combination of exchange rate difficulties and a slowdown in ad spending continues to plague the company.
