Alphabet Falls 6% in After-Hours Trading on Ad Revenue Miss

Alphabet, the parent company of Google, experienced a more than 6% decline in its shares during extended trading on Tuesday after reporting ad revenue that fell short of analysts’ estimates. Here are the key figures from the report:

• Earnings per share: $1.64 vs. $1.59 expected by LSEG (formerly Refinitiv).
• Revenue: $86.31 billion vs. $85.33 billion expected by LSEG.
• Google Cloud: $9.19 billion vs. $8.94 billion expected (StreetAccount).
• YouTube ads: $9.2 billion vs. $9.21 billion expected (StreetAccount).
• Traffic acquisition costs: $13.9 billion vs. $14.1 billion (StreetAccount).

While Alphabet reported its fastest quarter for revenue growth since early 2022, with a 13% increase from a year earlier, the ad revenue of $65.52 billion fell short of analysts’ expectations of $65.94 billion. YouTube, a significant contributor to growth, narrowly missed expectations.

Although the results generally exceeded estimates, investors were not satisfied, as Facebook’s ad business is growing at a faster pace, and TikTok poses an ongoing competitive threat. Google Cloud remains a growth engine, with a 26% expansion in the fourth quarter compared to the previous year. Operating income for the cloud business was $864 million, a significant improvement from the year-ago loss of $186 million.

CEO Sundar Pichai continues to emphasize investments in artificial intelligence, embedding new generative AI tools into Google’s key products. However, these investments come at the cost of workforce reductions, with additional layoffs expected following last year’s cut of 12,000 jobs.

Net income for the fourth quarter increased by 52% to $20.7 billion, or $1.64 per share, compared to $13.6 billion, or $1.05 per share, in the same period the previous year. Operating margin expanded to 27% from 24%.

The Other Bets segment, which includes Waymo (self-driving car business) and Verily (life sciences unit), reported revenue of $657 million, up from $226 million the previous year, with a narrowed loss of $863 million compared to $1.24 billion.

Despite the after-hours drop, Alphabet shares have surged 56% in the past year. Shares of Meta and Microsoft have also reached new highs, reflecting continued investor interest in tech stocks.