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Alphabet’s (GOOGL - Free Report) fourth-quarter 2023 earnings of $1.64 per share beat the Zacks Consensus Estimate by 2.5%. The figure grew 56.2% year over year.
Revenues of $86.31 billion increased 13% year over year (13% at constant currency).
Net revenues, excluding total traffic acquisition costs (“TAC”) (the portion of revenues shared with Google’s partners and amount paid to distribution partners and others who direct traffic to Google’s website), were $72.32 billion, which surpassed the consensus mark of $70.77 billion. The figure rose 14.6% from the year-ago quarter’s level.
TAC of $13.99 billion was up 8.2% year over year.
Top-line growth was driven by solid Search and YouTube’s performance. The growing cloud and Other Bets segments were a positive. Also, the improving advertisement business was a plus.
However, Alphabet continued to witness sluggishness in Google Network ads, which remained a concern.
Nevertheless, Alphabet’s growing investments in AI to boost its Search, YouTube and cloud business are likely to yield massive returns in the days ahead. This is expected to instill investor optimism in the stock in the days ahead.
Alphabet has gained 50.8% over a year, outperforming the Zacks Computer & Technology growth of 45.5%.
Alphabet reports revenues under Google Services, Google Cloud and Other Bets.
Google Services:
Revenues from the Google Services business increased 12.5% year over year to $76.31 billion, accounting for 88.4% of total revenues. The figure beat the Zacks Consensus Estimate of $74.95 billion.
Under this business, search revenues from Google-owned sites increased 12.7% year over year to $48.02 billion, surpassing the Zacks Consensus Estimate of $47.84 billion.
YouTube’s advertising revenues improved 15.5% year over year to $9.2 billion, while Network advertising revenues decreased 2.1% to $8.3 billion. While YouTube ad revenues came ahead of the Zacks Consensus Estimate of $9.1 billion, Network ad revenues were below the consensus mark of $8.5 billion.
Total Google advertising revenues were up 11% year over year to $65.52 billion and accounted for 76% of the total revenues. The figure beat the consensus mark of $65.45 billion.
Google subscriptions, platforms and devices revenues, formerly known as Google Other revenues, were $10.8 billion in the fourth quarter, up 22.7% year over year. The figure came ahead of the consensus mark of $9.7 billion.
Google Cloud:
Google Cloud revenues rose 25.7% year over year to $9.19 billion, accounting for 10.6% of the quarter’s total revenues. The reported metric surpassed the Zacks Consensus Estimate of $9.04 billion.
Other Bets:
Other Bets’ revenues were $657 million, up 190.7% year over year and accounted for 0.8% of the total fourth-quarter revenues. The figure beat the consensus mark of $298 million.
Regional Details
EMEA (29% of total revenues): GOOGL generated $25.01 billion in revenues from the region, increasing 15% year over year.
APAC (16.2% of total revenues): The region generated $13.98 billion in revenues, up 17% from the year-ago quarter’s level.
Other Americas (6% of total revenues): The region generated $5.2 billion in revenues, up 11% on a year-over-year basis.
United States (48.7% of total revenues): Alphabet generated $41.99 billion in revenues from the region, which increased 14% from the prior-year quarter’s level.
Operating Details
Costs and operating expenses were $62.6 billion, up 8.2% year over year. As a percentage of revenues, the figure contracted 360 basis points (bps) from the year-ago quarter’s level.
The operating margin was 27.5%, which expanded 360 bps year over year. Segment-wise, Google Services’ operating margin of 35% expanded 520 bps from the prior-year quarter’s level.
Google Cloud reported operating income of $864 million compared with a loss of $186 million in the year-ago quarter.
Other Bets reported a loss of $863 million compared with a loss of $1.24 billion in the prior-year quarter.
Balance Sheet
As of Dec 31, 2023, cash, cash equivalents and marketable securities were $110.9 billion, down from $119.9 billion as of Sep 30, 2023.
Long-term debt was $13.25 billion at the end of the reported quarter compared with $13.8 billion at the end of the previous quarter.
Alphabet generated $19.92 billion of cash from operations in fourth-quarter 2023 compared with $30.7 billion in third-quarter 2023.
GOOGL spent $11.02 billion on capex, netting a free cash flow of $7.9 billion in the reported quarter.
Image: Bigstock
Alphabet (GOOGL) Q4 Earnings Beat, Revenues Increase Y/Y
Alphabet’s (GOOGL - Free Report) fourth-quarter 2023 earnings of $1.64 per share beat the Zacks Consensus Estimate by 2.5%. The figure grew 56.2% year over year.
Revenues of $86.31 billion increased 13% year over year (13% at constant currency).
Net revenues, excluding total traffic acquisition costs (“TAC”) (the portion of revenues shared with Google’s partners and amount paid to distribution partners and others who direct traffic to Google’s website), were $72.32 billion, which surpassed the consensus mark of $70.77 billion. The figure rose 14.6% from the year-ago quarter’s level.
TAC of $13.99 billion was up 8.2% year over year.
Top-line growth was driven by solid Search and YouTube’s performance. The growing cloud and Other Bets segments were a positive. Also, the improving advertisement business was a plus.
However, Alphabet continued to witness sluggishness in Google Network ads, which remained a concern.
Nevertheless, Alphabet’s growing investments in AI to boost its Search, YouTube and cloud business are likely to yield massive returns in the days ahead. This is expected to instill investor optimism in the stock in the days ahead.
Alphabet has gained 50.8% over a year, outperforming the Zacks Computer & Technology growth of 45.5%.
Alphabet Inc. Price, Consensus and EPS Surprise
Alphabet Inc. price-consensus-eps-surprise-chart | Alphabet Inc. Quote
Segments in Detail
Alphabet reports revenues under Google Services, Google Cloud and Other Bets.
Google Services:
Revenues from the Google Services business increased 12.5% year over year to $76.31 billion, accounting for 88.4% of total revenues. The figure beat the Zacks Consensus Estimate of $74.95 billion.
Under this business, search revenues from Google-owned sites increased 12.7% year over year to $48.02 billion, surpassing the Zacks Consensus Estimate of $47.84 billion.
YouTube’s advertising revenues improved 15.5% year over year to $9.2 billion, while Network advertising revenues decreased 2.1% to $8.3 billion. While YouTube ad revenues came ahead of the Zacks Consensus Estimate of $9.1 billion, Network ad revenues were below the consensus mark of $8.5 billion.
Total Google advertising revenues were up 11% year over year to $65.52 billion and accounted for 76% of the total revenues. The figure beat the consensus mark of $65.45 billion.
Google subscriptions, platforms and devices revenues, formerly known as Google Other revenues, were $10.8 billion in the fourth quarter, up 22.7% year over year. The figure came ahead of the consensus mark of $9.7 billion.
Google Cloud:
Google Cloud revenues rose 25.7% year over year to $9.19 billion, accounting for 10.6% of the quarter’s total revenues. The reported metric surpassed the Zacks Consensus Estimate of $9.04 billion.
Other Bets:
Other Bets’ revenues were $657 million, up 190.7% year over year and accounted for 0.8% of the total fourth-quarter revenues. The figure beat the consensus mark of $298 million.
Regional Details
EMEA (29% of total revenues): GOOGL generated $25.01 billion in revenues from the region, increasing 15% year over year.
APAC (16.2% of total revenues): The region generated $13.98 billion in revenues, up 17% from the year-ago quarter’s level.
Other Americas (6% of total revenues): The region generated $5.2 billion in revenues, up 11% on a year-over-year basis.
United States (48.7% of total revenues): Alphabet generated $41.99 billion in revenues from the region, which increased 14% from the prior-year quarter’s level.
Operating Details
Costs and operating expenses were $62.6 billion, up 8.2% year over year. As a percentage of revenues, the figure contracted 360 basis points (bps) from the year-ago quarter’s level.
The operating margin was 27.5%, which expanded 360 bps year over year. Segment-wise, Google Services’ operating margin of 35% expanded 520 bps from the prior-year quarter’s level.
Google Cloud reported operating income of $864 million compared with a loss of $186 million in the year-ago quarter.
Other Bets reported a loss of $863 million compared with a loss of $1.24 billion in the prior-year quarter.
Balance Sheet
As of Dec 31, 2023, cash, cash equivalents and marketable securities were $110.9 billion, down from $119.9 billion as of Sep 30, 2023.
Long-term debt was $13.25 billion at the end of the reported quarter compared with $13.8 billion at the end of the previous quarter.
Alphabet generated $19.92 billion of cash from operations in fourth-quarter 2023 compared with $30.7 billion in third-quarter 2023.
GOOGL spent $11.02 billion on capex, netting a free cash flow of $7.9 billion in the reported quarter.
Zacks Rank & Stocks to Consider
Currently, Alphabet has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Arista Networks (ANET - Free Report) , Logitech International (LOGI - Free Report) and Itron (ITRI - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista Networks shares have returned 116.5% over the past year. The long-term earnings growth rate for ANET is pegged at 19.77%.
Shares of Logitech International have returned 23.2% over the past year. The long-term earnings growth rate for LOGI is currently projected at 15.75%.
Shares of Itron have gained 22.3% over the past year. The long-term earnings growth rate for ITRI is currently projected at 23%.