Alphabet (NASDAQ:GOOGL) has reported fourth-quarter 2023 earnings of $1.64 per share. This marks a notable 56.2% increase compared to the same period last year. The company’s revenues reached $86.31 billion, reflecting a 13% year-over-year growth (13% at constant currency).
Net revenues, excluding total traffic acquisition costs (“TAC”), amounted to $72.32 billion, outpacing the consensus estimate of $70.77 billion and demonstrating a robust 14.6% increase from the corresponding quarter in the previous year. TAC for the quarter stood at $13.99 billion, marking an 8.2% year-over-year increase.
The strong top-line growth was primarily attributed to the stellar performance of Search and YouTube, along with positive contributions from the growing cloud and Other Bets segments. Despite these successes, Alphabet faced challenges in Google Network ads, signaling an area of concern.
Alphabet continues to invest in artificial intelligence (AI) to enhance its Search, YouTube, and cloud business, expecting significant returns in the future. This strategic move is anticipated to boost investor confidence in the stock in the coming days.
Over the past year, Alphabet has seen a remarkable 50.8% increase in its stock value, outperforming the Zacks Computer & Technology growth of 45.5%.
Segment Performance
Google Services
Revenues from the Google Services business surged by 12.5% year over year, reaching $76.31 billion, constituting 88.4% of total revenues. Notably, this figure exceeded the Zacks Consensus Estimate of $74.95 billion. Search revenues from Google-owned sites increased by 12.7%, totaling $48.02 billion, while YouTube’s advertising revenues improved by 15.5% to $9.2 billion.
Google Cloud
Google Cloud reported a substantial 25.7% year-over-year increase in revenues, reaching $9.19 billion, representing 10.6% of the quarter’s total revenues. This surpassed the Zacks Consensus Estimate of $9.04 billion.
Other Bets
Other Bets segment revenues experienced a remarkable 190.7% year-over-year surge, reaching $657 million and accounting for 0.8% of total fourth-quarter revenues. This figure exceeded the consensus mark of $298 million.
Regional Performance
- EMEA (29% of total revenues): Generated $25.01 billion in revenues, up 15% year over year.
- APAC (16.2% of total revenues): Produced $13.98 billion in revenues, reflecting a 17% increase from the previous year.
- Other Americas (6% of total revenues): Contributed $5.2 billion in revenues, marking an 11% year-over-year increase.
- United States (48.7% of total revenues): Alphabet generated $41.99 billion in revenues from the region, a 14% increase from the prior-year quarter.
Operating Details
Total costs and operating expenses reached $62.6 billion, marking an 8.2% year-over-year increase. The operating margin expanded to 27.5%, growing by 360 basis points from the previous year. Google Services’ operating margin, in particular, saw a notable 520 basis points expansion.
Google Cloud reported an operating income of $864 million, a significant improvement compared to the $186 million loss in the year-ago quarter. Conversely, Other Bets reported a loss of $863 million, narrowing down from the $1.24 billion loss in the prior-year quarter.
Balance Sheet Highlights
As of December 31, 2023, Alphabet’s cash, cash equivalents, and marketable securities amounted to $110.9 billion, showing a decrease from $119.9 billion as of September 30, 2023. Long-term debt stood at $13.25 billion at the end of the reported quarter, compared to $13.8 billion at the end of the previous quarter. Alphabet generated $19.92 billion in cash from operations during the fourth quarter of 2023, with capex expenditures reaching $11.02 billion and resulting in a free cash flow of $7.9 billion for the quarter.
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