Last week, Alphabet aka Google (Nasdaq: GOOG) reported its fourth quarter results. It surpassed revenue and earnings estimates driven by its GenAI offerings and accelerated growth in Google Cloud. However, it missed estimates for advertising revenue.

Google’s Financials

Alphabet’s fourth quarter net revenues grew 13% to $86.3 billion, beating the market’s forecast of $85.33 billion. Net income was $20.7 billion or $1.64 per share, beating analyst estimates of $1.59.

By segment, revenues from Google Services that includes Search, Advertising, Android, Chrome, Hardware, Google Maps, Google Play, and YouTube ads grew 12.4% to $76.3 billion. Advertising revenue grew 11% to $65.5 billion, short of analyst estimates of $65.94 billion. Revenue from YouTube ads grew 15.5% to $9.2 billion missing analyst estimates of $9.21 billion. Network advertising revenues were $8.3 billion, down 2%. Operating income from the Google Services segment was $26.73 billion compared to $20.2 billion a year ago.

Google Cloud revenues grew 25.6% to $9.19 billion ahead of analyst estimates of $8.94 billion. Operating income was $864 million, compared to a loss of $186 million a year ago. 

Revenues from Other Bets grew a whopping 190% to $657 million driven by a milestone payment. Operating loss was $863 million, compared to $1,237 million a year ago.

For the full fiscal year 2023, Google’s annual revenue grew 9% to $307.4 billion. Google Cloud full year revenues grew 26% to $33 billion. Net income was $73.8 billion or $5.8 per share, up from $59.97 billion or $4.56 per share a year ago. Analysts expected earnings of $5.19 per share on revenues of $303.41 billion.

Google’s AI Platform

Google continued to push forth with its GenAI offerings. At the end of the year, it launched the large language model Gemini, which is designed to understand and combine text, images, audio, video, and code in a natively multimodal way. It can run on everything from mobile devices to data centers. Gemini provides a great foundation for building next-generation AI applications. 

For developers building GenAI applications, Google offers an enterprise AI platform called Vertex AI. It offers access to Gemini and has over 130 GenAI models and tools. The company disclosed that Vertex AI has seen strong adoption with API requests increasing nearly six times from H1 to H2 last year. Its customers include Deutsche Telekom, Moody’s, Hugging Face, McDonald’s, Motorola Mobility, and Verizon. 

Another recent launch is Duet AI, packaged AI agents for Google Workspace and Google Cloud Platform. Since its launch, thousands of companies and over a million testers have used Duet AI. Its customers include Singapore Post, Uber, Woolworths, Wayfair, GE Appliances, Commerzbank, Fiserv, Spotify, and Pfizer. It has nearly 90,000 Google Cloud GenAI-enabled consultants.

During the earnings call, the company also announced that it is experimenting with Gemini in Search to make its Search Generative Experience faster for users. It’s available through Search Labs in seven languages. It has seen a 40% reduction in latency in English in the US. Its image recognition technology called Google Lens also uses GenAI. You can ask questions in a visual search and get AI-powered insights. 

In addition to Search, Google offers AI-powered solutions for advertisers. This includes a new conversational experience that uses Gemini for creating search campaigns. 

Bard, its conversational AI tool, is also powered by Gemini Pro to increase its understanding, summarizing, reasoning, coding, and planning capabilities. It’s now available in over 40 languages and over 230 countries around the world. 

Google says it will continue to focus on its AI investment but will also continue to cut more jobs. It laid off over 12,000 employees last year and 1,000 employees in January this year. 

Its stock is trading at $144.96 with a market capitalization of $1.79 trillion. It hit a 52-week high of $155.2 in January this year and a 52-week low of $88.86 in February last year.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research of product-market fit, channel execution, and other factors. My primary interest is in product strategy. While this may have bearing on stock movements, my writings tend to focus on long-term implications. The information presented is illustrative and educational, but should not be regarded as a complete analysis nor recommendation to buy or sell the securities mentioned herein. I am not a registered investment adviser and I am not receiving compensation for this article. I am an investor in this company.

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