Alphabet Q4 earnings beat estimates, ad revenue disappoints

Google parent Alphabet (GOOGL, GOOG) posted better-than-expected fourth quarter results after the market close on Tuesday. The tech giant reported earnings of $1.64 per share, topping the $1.59 estimate. Ex-TAC revenue of $72.32 billion was better than the Bloomberg consensus expectation of $70.97 billion. Ad revenue, however, fell just short, $65.52 billion versus an estimated $65.8 billion.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Stephanie Mikulich

Video Transcript

- All right, and we move on here. We got Alphabet earnings as well, another big name. Those shares are down in the after hours. Remember, nice run into this print, Julie, the stock was up about 10% this year, more than 50% in the last 12 months. Initial reaction we're down here, EPS 164, that's a beat. The Street was close to 159. On revenue, 86.31 billion, also a beat, Street was closer to 85.36.

Cloud is interesting because remember that disappointed last time they reported, but this time 9.19 billion, that's also a beat. But some interesting questions here. There's obviously the move here in part was this general more positive, optimistic outlook about the general advertising environment in 2024. I think you'll be looking for more questions about the cloud business as well and what they see ahead.

- Did you say the ad revenue number already?

- I did not.

- OK, so ad revenue here at $65.5 billion. 65.8 is what analysts were looking for. And to your point, there was a lot of attention on that. And from what I was seeing from a lot of the previews, a lot of optimism around ad spending. So the fact that that number missed, and obviously that number is a big number for the company, that's the biggest source of its revenue. So that is something that I think people are paying attention to here, that miss in the ad revenue perhaps one of the things responsible for that quick drop that we are seeing in the shares.

- Yeah. And AI is a very, I mean, listen that will be in focus again. It's a bit different than Microsoft in that when you talk about AI, and we're about to speak to some smart financial analysts, the question is like, all right, what's the contribution like, right? With Google, I think it's a way more interesting conversation about as AI develops, how much does that append and redefine traditional search, and what that means for Google.

- Most definitely. And what's that going to do to their advertising revenue as a result of that. Sundar Pichai on his statement here in the earnings release, he says we're pleased with the ongoing strength in search and the growing contribution from YouTube and Cloud. Each of these, to your point, is already benefiting from our AI investments and innovation. As we enter the Gemini era, he says the best is yet to come. Gemini, their generative AI offering. Although he only said AI once in his sentence.

- Just for the conference call, Julie.

- So I just said it three times. So I don't think we can read anything into that. But it is obviously AI is going to be a very large part of the discussion. Initial first blush as we look at the drop here, there was so much hope. And sometimes these companies do come out and surpass those expectations. But at least at first blush here, it doesn't look like the Alphabet has in particular with that 4% drop.

- Yeah. We'll see also, it'll be interesting, another question, there's going to be some changes in the c-suite at this company. Ruth Porat, remember, she, she's, she already announced obviously a well respected CFO, who's going to be the replacement. There are some analysts, Julie, you see that as a potential catalyst ahead when they finally name that CFO.

- Right. We'll be watching to see if there are any indications that we end up getting about who for sure.