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Google’s parent company Alphabet (GOOG, GOOGL) reported fourth-quarter results after the bell on Tuesday, which fell short of analysts’ expectations for advertising revenue, the core of the tech giant’s business.
Shares fell 4% in extended trading.
Third-quarter revenue excluding traffic acquisition costs was $72 billion, compared to expectations of nearly $71 billion. This is more than the $63.12 billion the company generated in the same period last year. But investors seem to be paying attention to the advertising failure.
The company reported that its cloud business is continuously growing and gaining importance to investors due to its usefulness in AI development. Google Cloud’s revenue exceeded expectations, reaching more than $9 billion and growing more than 20% year over year.
Here are some of Alphabet’s most important metrics compared to what Wall Street expected for the company’s fiscal fourth quarter, according to Bloomberg data.
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Revenue excluding traffic acquisition costs: $72.32 billion vs. $70.97 billion expected ($63.12 billion in Q4 2022)
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Adjusted earnings per share: $1.64 vs. $1.59 expected ($1.05 in Q4 2022)
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Cloud revenue: $9.19 billion vs. $8.95 billion expected ($7.32 billion in Q4 2022)
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Advertising revenue: $65.5 billion vs. $65.8 billion expected ($59.04 billion in Q4 2022)
“We’re pleased with the continued strength in search and the growing contribution from YouTube and the cloud,” Google CEO Sundar Pichai said in the company’s earnings call. “Each of these are already benefiting from our AI investments and innovation.”
The earnings report comes just weeks after Google laid off hundreds of employees across multiple departments in an effort to cut costs and focus on growth areas including AI. The tech giant will join its U.S. peers and others that have relied on layoffs to improve efficiency as they expand significantly during the coronavirus era.
Last year, Google was widely seen as trying to catch up with Microsoft (MSFT), which was early to enjoy the cultural excitement around consumer AI chatbots in the tech industry. Microsoft has invested in OpenAI, the company behind the popular chatbot ChatGPT.
The company is aiming to gain more market share in the cloud computing market, currently in third place behind West Coast competitors Amazon (AMZN) and Microsoft.
Hamza Shaban is a reporter for Yahoo Finance, covering markets and economics. Follow Hamza on Twitter @hshaban.
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