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Big Q4 Earnings Miss For Google

Feb. 02, 2023 5:45 PM ETAlphabet Inc. (GOOG), GOOGLMETA25 Comments


  • Alphabet Inc. reported results that missed estimates on both lines.
  • Google's revenue miss largely was the result of macro issues, but its profit miss was the result of overly high cost increases.
  • The company will have to prove it's able to become more efficient.
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Bull and bear shape writing by lines and dots.

sutthirat sutthisumdang

Article Thesis

Alphabet Inc. (NASDAQ:GOOG, NASDAQ:GOOGL) ("Google") reported its fourth quarter earnings results on Thursday afternoon. The company missed estimates on both lines, and while the company is still highly profitable, growth has been underwhelming and margins

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This article was written by

Jonathan Weber profile picture

Jonathan Weber holds an engineering degree and has been active in the stock market and as a freelance analyst for many years. He has been sharing his research on Seeking Alpha since 2014. Jonathan’s primary focus is on value and income stocks but he covers growth occasionally.

He is a contributing author for the investing group Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of GOOG, META either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (25)

These bloated costs are unforced errors which is most concerning for me. If we all know what needs to be done why doesnt the ceo get it done? Im quickly losing faith in management.
Can someone provide some thoughts on Google relationship with China?
The ad business is imo more vulnerable than people think. everyone was assuming ads would keep being sold on tv when google launched. Now everyone assumes ads are on Google. There is a risk here of major industry shift .. Google needs to be the top dog for search and cross platform tracking to stay safe.
@wboz 80 cents of every ad dollar go to Facebook and Google. The rest of the publishers can fight over the remaining 20 cents. Companies can’t afford not to advertise on google, so I am no too worried about this.
@Marcelito erm ... Yes, you have described the present day. Like I said, tv networks weren't worried about google ... Before google ... :)
Tao Jaxx profile picture
I don't understand how GOOG is deriving this much revenue from advertising. Obviously I have sample bias but I'm sure there's more and more folks like me: with NordVPN, Firefox ad blocker and DuckDuckGo, Google probably have close to zero marketable data on me. I completely stopped using their search engine 6 or 7 years ago, possibly longer than that, can't recall when was the last time I did.
@Tao Jaxx You are in the absolute minority though.
@Ekernan123 An increasingly growing minority
@Tao Jaxx I even began to shift to use DuckDuckGo However I am still using Google until I find another alternative
TommyIrish profile picture
“Big tech, including Alphabet, has been getting inefficient and bloated to some degree, and that hurts profitability now”

Very true, of course.

Then again, Meta doubled from $100 after a bit of tough love from the Boss!

Suppose for sake of argument Google management got religion!?
Jonathan Weber profile picture
@TommyIrish They weren't as ultra-cheap as Meta was, but GOOG still would have significant upside I believe. All the best
CEO should know it takes t8me to assimilate new employees. But his head is so far up business theory (employees being the best assetts) that I suspect he has created a large mess with a bunch of part time workers getting paid full time. Google isn't showing much. It seems all the side projects are failures. This is the problem with some monopolies. They think because they are doing so great they can do no wrong. This is meta and twitter 2.0. Twitter is the worst cause they were never profitable.
@johngonole Yep. Big Tech becoming the inefficient, bloated, stagnating behemoths of the stock markets of the past: AT&T, GE, GM etc. Still priced as if they're the hyper-growth darlings of yesterday's market.
Gary Kime profile picture
Well balanced. It’s my second largest position and will stay that way. It’s a value for a great business!
Jonathan Weber profile picture
@Gary Kime thanks! Glad you liked it. All the best
ReturnOnEquity profile picture
Volatility is a constant in business. In one of the Warren Buffets letter to shareholders he has said - "We tolerate volatility [changes in revenues and earnings] on a daily basis. Why should we worry about it when the time frame changes to one where earth makes one orbit around the sun?"

We need lot of patience. Honestly the fact that revenues have still held up quite well in the eye of recession and headwinds of strong dollar is quite good!

Henceforth we shouldn't really expect $GOOGL to grow like it did from 2010-2021. Thats just unrealistic! But we should expect healthy buybacks, a bit of debt financing to enhance ROE, improving margins and costing structure, some organic growth in Cloud and other bets and stuff like that. And slump in share price is actually helpful to the investor though deceitful as it sounds.

$GOOGL wont be a 100 bagger, but perhaps it will be a 5 or 7 bagger given 10-15 years time. And that is all I could ask far given the risk/return calculus.

@jonathan Weber You write amazing articles! Always enjoy reading ur thoughts.
Jonathan Weber profile picture
@ReturnOnEquity it won’t grow as much as it did in the past, but these results were still underwhelming. All the best
ReturnOnEquity profile picture
@Jonathan Weber Patience! Patience! Patience!

We are still in recession. Cannot expect things to change overnight.
tttthatswhatwesee profile picture
Well, you missed the most important point of the story. Alphabet announced the open access of PaLM. I totally understand that mainstream media will need another day to understand the meaning of this announcement. However, analysts and investors should do a better job on that. PaLM is the biggest language model on earth. Three time as big as Chat-GPT. Actually, the announcement is like the declaration of war - and it only just begun. During the next six months we can see the awaking of a giant and I wonder if OpenAi and MSFT will still be the hot AI story. Long Alphabet.
Jonathan Weber profile picture
@tttthatswhatwesee when do you see this generate what kind of profit? All the best
@Jonathan Weber well balanced comments, GOOG are cycling huge numbers, imo, was always going to be difficult to show any growth. on my numbers that has almost worked its way out, maybe another couple of qtrs. on costs the criticism is justified. its a big ship will take time to turn around and investors will question their resolve until proven, imo.
Jonathan Weber profile picture
@Solvethe riddle glad you enjoyed the article! All the best
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