Google Beats Q4 Estimates, But Mixed Signal from Ad Growth Raises Eyebrows

Mountain View, CA – January 31, 2024 – Google parent Alphabet Inc. (GOOGL) presented a mixed bag of results for its fourth quarter, exceeding analyst expectations on overall revenue and earnings while simultaneously raising concerns with a slowdown in its core advertising business.

Headline Numbers Impress

The earnings per share (EPS) came in at $1.64, surpassing estimates of $1.60. Additionally, the revenue reached $86.31 billion, topping projections of $85.25 billion. The year-over-year growth showed revenue up 13% and EPS up 56%.

A Tale of Two Businesses

The positive headline figures were driven by strong performance in Google Cloud, where revenue surged 25% year-over-year to $9.19 billion, exceeding analyst estimates. This marked a continued acceleration from the 22% growth observed in the previous quarter. However, the star of Google’s show – its advertising business – painted a less optimistic picture. Advertising revenue rose 11% to $65.52 billion, falling slightly short of expectations. YouTube ad revenue, a key driver for Google, met expectations with a 15% increase to $9.2 billion.

Market Reacts with Cautious Optimism

Despite topping estimates, Google stock dipped 4.3% in after-hours trading. Investors likely grappled with the conflicting signals: strong overall performance overshadowed by the deceleration in advertising growth. Analysts offered varied interpretations. Mona Mahajan, senior technology analyst at RBC Capital Markets, expressed concern about macroeconomic headwinds and increased competition from platforms like TikTok. On the other hand, David Meier, technology strategist at Wells Fargo, acknowledged Google Cloud’s momentum and highlighted the need for advertising to rebound for investor confidence to fully recover.

Looking Ahead

Google executives acknowledged the slowdown in advertising, attributing it to macroeconomic factors and ongoing competition. However, they remained optimistic about long-term prospects, highlighting investments in artificial intelligence and other growth areas. The company also unveiled plans to increase capital expenditures, focusing on cloud infrastructure and data centers.

Key Takeaways

Google delivered a mixed bag of Q4 results, exceeding overall expectations but raising concerns with slower advertising growth. Continued strength in Google Cloud offers a silver lining, suggesting diversification efforts are paying off. Investor sentiment remains cautious, awaiting signs of a rebound in the core advertising business. Google’s increased focus on AI and cloud infrastructure could pave the way for future growth.

Beyond the Numbers

The mixed Google earnings report paints a broader picture of the challenges and opportunities facing the tech giant. While macroeconomic headwinds and competition cast a shadow on its core business, Google’s investments in new technologies and continued cloud momentum offer a glimpse of a more resilient future. The ability to reignite advertising growth and capitalize on emerging opportunities will be key to determining Google’s trajectory in the months and years to come.

Additional Resources

Google Investor Relations:

Alphabet Q4 2023 Earnings Release:

CNBC Analysis of Google Earnings:

Scroll to Top