Google parent Alphabet Inc’s financial results for the first quarter of 2023 beat Wall Street expectations, with revenue rising 2.6% to $69.79 billion from 68.01 billion in the year-ago period. The figures also beat market estimates of $68.95 billion, according to Refinitiv data. Earnings per share of $1.17 also beat estimates of $1.07.
The company has also announced a $70 billion share repurchase program, in continuation of last year’s announcement in April. It will take into account the stock price of both Class A and Class C shares for the buyback. Class A shares are those that come along with voting rights, while Class C shares have no such rights. Alphabet was the second higher repurchaser of its own stock in 2022, only next to Apple.
Google’s advertising malaise persisted during the quarter, and it is also grappling with advances in artificial intelligence technology, particularly by Microsoft-backed OpenAI’s ChatGPT, which threaten to undercut its search engine dominance.
Here are the three key takeaways from Alphabet’s earnings
Financial highlights
The tech giant’s net income dropped 9% to $15.05 billion in the quarter under review from $16.44 billion in the year-ago period. Operating income, too, fell over 13% to $17.41 billion in Q1 2023 from $20.09 billion in Q1 2022.
“We are pleased with our business performance in the first quarter, with Search performing well and momentum in Cloud. We introduced important product updates anchored in deep computer science and AI,” Sundar Pichai, chief executive of Alphabet and Google, said in an earnings release.
“We introduced important product updates anchored in deep computer science and AI. Our North Star is providing the most helpful answers for our users, and we see huge opportunities ahead, continuing our long track record of innovation,” he added.
Ad revenue dips; ChatGPT threat weighs
An ongoing slump in advertising revenues due to a cutback in marketing spends amid global macroeconomic headwinds has continued to hurt Google’s growth. There was also stiff competition from platforms like TikTok, which is hugely popular, especially among a younger audience.
Despite beating market estimates of $6.6 billion, Google’s advertisement sales at YouTube — one of the major income avenues for the tech giant apart from Search ads — fell 2.6% to $6.69 billion in the first quarter. YouTube revenue was down 7.8% in the fourth quarter of 2022 following a 1.9% dip the quarter before that.