The Google group Alphabet can almost stop the decline in its advertising sales. In the first quarter of 2023, Google earned $54.5 billion from advertising. That’s just $113 million or 2 per thousand less than in the first quarter of 2022 – analysts had expected a clearer decline in advertising. Total group sales even increased by 2.6 percent to $69.8 billion.
In addition, the Google Cloud division made an operating profit for the first time. Alphabet management wants to buy back $70 billion of its own stock. All of this pleases institutional investors, so Google shares are down in after-hours trading Announcement of the financial figures could increase. “We are satisfied with our business development in the first quarter,” said CEO Sundar Pichai, “The search is going well and we have momentum in the cloud business.”
In addition to advertising sales on Google’s own pages and apps, third-party offerings marketed by Google and YouTube, there are also other revenues of $7.4 billion (+8.8%). This includes, for example, income from the sale of end devices and from the Play Store. Overall, Google’s turnover was almost 62 billion dollars (+0.8%). The separately managed group division Google Cloud increases by 28 percent and has a turnover of 7.5 billion dollars. There are also smaller contributions from other bets (down a third to $288 million) and from currency hedging (down 70 percent to $84 million). In total, this results in the mentioned group turnover of 69.8 billion dollars (+2.6%).
Less profit
Google’s operating profit fell 1 percent to $21.7 billion. For the first time in the company’s history, the Google Cloud creates operating profit, namely 191 million dollars. A year ago there was still a minus of 706 million. Other bets’ operating loss rose by almost half to more than $1.2 billion.
The loss of the Alphabet Group’s general costs, which are not allocated to any specific division, has increased almost tenfold. There’s now around a $3.3 billion operating loss. The reason for this is that Alphabet books the expenses for AI development at Deep Mind here. (The group only started to merge Google Brain and Deep Mind into Google Deepmind after the end of the quarter.)
Overall, the group’s operating profit fell by more than 13 percent to $17.4 billion. Operating cash flow fell more than 6 percent to $23.5 billion. Net income fell more than eight percent to $15.1 billion.
one-off effects
The operating result is affected by notable one-off effects: It is burdened by the wave of layoffs announced in the first quarter – but not yet implemented at the time – by 2.6 billion dollars. Conversely, Google has increased the expected lifespan of its servers; that reduces depreciation by nearly $1 billion and supports net income by $770 million. In addition, Alphabet has postponed the grant date of shares to employees; this also supports the quarterly profit, but will not affect the annual result. It is strange that Alphabet’s notification does not reveal the extent to which this change in dates will improve the quarterly result.
The annual salary of the Alphabet boss is currently causing more excitement. Pichai earned no less than $226 million in 2022. That’s 800 times the median income of its employees. The man has decided to put 12,000 of his employees on the streets.
The stock market reacted cautiously positive to Alphabet’s results. The share price initially made a small jump after the trading session, but then gave way again and closed with a small plus of around 1.5 percent.
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