alphabet, Google’s parent company, is in a period of stalled growth as economic uncertainty reverberate across Silicon Valley. Gone are the days of the pandemic boom, when the internet giant’s profit and headcount soared.
On Thursday the company posted It’s the fourth straight drop in earnings as it struggles with a slowdown in digital advertising. Net income fell 34 percent to $13.6 billion, falling short of Wall Street’s expectations of $15.3 billion, according to data compiled by FactSet.
The internet giant also generated revenue of $76 billion in the last three months of 2022, down 1 percent year-on-year and in line with analyst estimates.
Google has years of experience rapid growth As consumers spent more time and money online during the coronavirus pandemic, the advertising market on which the company depends has increased. These benefits began to dwindle last year, when rising interest rates and inflation prompted advertisers to rein in spending.
“We are on an important journey to sustainably overhaul our cost structure and build financially sustainable, dynamic and growing businesses at Alphabet,” Sundar Pichai, the company’s chief executive officer, said in a statement.
Layoffs at Big Tech
Several tech companies are now retreating after a pandemic hiring wave.
In an earnings call, Mr Pichai said the company is making various efforts to rein in spending, including by improving the financial performance of its lineup of Pixel phones and other devices, attempting to make its loss-making cloud division profitable and doing so business to strengthen its video platform YouTube.
Alphabet shares fell 3 percent in after-hours trading.
One of the most notable recent cost-cutting moves has focused on its workforce. After hiring 30,000 people in the first nine months of last year, Alphabet said last month it would Dismantle 12,000 workers, or 6 percent of employees. The company said Thursday it expects to incur $1.9 billion to $2.3 billion in employee severance and related costs, most of which would be recognized in the current quarter.
Alphabet also expects to spend $500 million this quarter to shed unnecessary real estate to reduce spending. It said it would also better manage spend for suppliers and use more artificial intelligence to automate some tasks and increase productivity.
Alphabet said it now has 190,234 employees, up from 186,779 in October. Workers in the United States affected by the company’s layoffs will officially remain employees through March, and the exit process could take longer for workers in other countries.
The advertising decline coincided with other unwelcome developments for Alphabet. ChatGPT, an artificial intelligence chatbot developed by OpenAI, debuted to great fanfare in November, leading to speculation that it could disrupt Google’s search engine dominance. Mr. Pichai declared “code red”. in response, reassigning teams to prioritize AI projects.
Mr Pichai said that in the coming months, Google will allow users to access a version of its search engine that includes chatbot capabilities, which reported earlier from the New York Times. He said the company will also integrate more AI into apps like Gmail and Docs, and its cloud unit will sell the underlying technology to other companies.
Revenue from Google’s search engine, its largest business, fell more than 1 percent to $42.6 billion in the fourth quarter, down from analysts’ estimates of $43.3 billion.
Google recently had to defend itself against the government. The Justice Department last month sued the company for the second time in three years, most recently claiming Google did so abused his position as an advertising technology monopoly. The Justice Department wants to force Google to divest parts of its suite of ad technology products, including software to buy and sell ads, a marketplace to complete the transactions and a service to show the ads on the web.
This division made $8.5 billion last quarter, down 9 percent year-on-year. Analysts had expected sales of $8.8 billion.
Advertising revenue on YouTube fell nearly 8 percent to $7.96 billion, below the $8.2 billion expected by analysts. In October, the company reported falling sales from YouTube, suggesting it’s more vulnerable to digital advertising fluctuations than Google.
Revenue at Google Cloud, the division that provides software and technology services to other businesses, rose 32 percent to $7.3 billion. Analysts had estimated $7.4 billion. Google has invested billions over the years to expand the unit, but it’s continued to lose money. In the fourth quarter, the company posted a loss of $480 million.
