Google’s Q4 Earnings Exceed Expectations, But Advertising Growth Disappoints

Alphabet reported strong quarterly earnings, but the stock fell as its core advertising business missed expectations. Cloud computing revenue grew and surpassed estimates.

Google’s gross revenue rose to $86.31 billion, while advertising revenue and YouTube ad revenue slightly missed views. The stock fell 4.3% in extended trading after the report. Despite this, Alphabet repurchased $16.2 billion of its own stock in the quarter. Finally, Alphabet shares had gained 9% in 2024 before the report, and the stock holds a Relative Strength Rating of 89 out of a best-possible 99.

MetricQ4 2023 ResultsExpectations
Earnings per share (GAAP)$1.64Estimated at $1.60
Gross revenue$86.31 billionEstimated at $85.25 billion
Advertising revenue$65.52 billionEstimated at $65.82 billion
Cloud computing revenue$9.19 billionEstimated at $8.94 billion
YouTube ad revenue$9.2 billionIn line with estimates

This table provides an overview of Google’s key financial metrics for Q4 2023, comparing the reported results with the expectations. Despite advertising revenue falling slightly short of estimates, Google’s overall performance demonstrates strength, particularly in cloud computing and YouTube ad revenue. Alphabet Stocks Decline Due to Disappointing Google Ad Revenue (Source: CNBC)

Google’s Q4 Earnings Exceed Expectations, But Advertising Growth Disappoints

Sundar Pichai net worth

According to GOOGL Stock: Google Earnings Top Estimates But Advertising Growth Disappoints: Alphabet, the parent company of Google, released its fourth-quarter earnings and revenue, surpassing consensus estimates. However, the market response was mixed as the core advertising business marginally fell short of expectations, while cloud computing revenue demonstrated strong growth.

During Q4, Google’s earnings under generally accepted accounting principles (GAAP) soared by 56% to $1.64 per share. The company’s gross revenue also saw a notable 13% uptick, reaching $86.31 billion.

Despite the positive figures, Google’s Q4 advertising revenue increased by 11% to $65.52 billion, slightly missing the projected $65.82 billion. Analysts, polled by FactSet, had anticipated an EPS of $1.60 on revenues of $85.25 billion.

Impressive Growth in Cloud Computing

One of the highlights of Google’s report was the impressive growth in cloud-computing revenue, which surged by 25% to $9.19 billion, surpassing estimates of $8.94 billion. Notably, this marked a significant improvement from the 22% growth in the preceding quarter. Additionally, YouTube ad revenue climbed by 15% to $9.2 billion, aligning with expectations.

However, following the release of the earnings report, GOOGL stock experienced a 4.3% drop in after-hours trading, settling near $145.

Mark Mahaney, an analyst at Evercore ISI, emphasized the fundamental strength of the quarter, highlighting the accelerated quarter-over-quarter growth in gross revenue, search, YouTube, cloud, and other revenues. Despite this, he noted that the market’s reaction reflected the failure to meet heightened expectations.

Google invested $16.2 billion in stock buybacks during Q4, following a $15.78 billion repurchase in the previous quarter. Additionally, the company’s Q4 traffic acquisition costs rose by 8% to $13.98 billion. Notably, Google’s internet search-related payments to Apple are a focal point in the Department of Justice’s antitrust lawsuit against Alphabet.

Google Safe Search

Impressively Q3 2023 results

Google rebounded impressively following a sell-off after its Q3 2023 results, with GOOGL stock plummeting by 13% on October 25, the day after the Q3 report. Although shares hit a low of $121.46 on October 27, Google stock rallied by 26% over the subsequent three months leading up to the Q4 earnings report.

Heading into the earnings report, Alphabet shares had accrued a 9% increase in 2024. In 2023, Google stock soared by 58%, outperforming other major tech stocks such as Meta Platforms (META), (AMZN), and Netflix (NFLX).

Furthermore, GOOGL stock currently holds a Relative Strength Rating of 89 out of a possible 99, according to IBD Stock Checkup. However, Google stock is currently trading above a buy zone, indicating an extended position.