Google Group Alphabet increases revenues other than advertising faster

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“We ended 2023 with very strong financial results in the fourth quarter,” said Alphabet CFO Ruth Porat. Compared to the fourth quarter of 2022, revenue increased by 13.5 percent to 86.3 billion US dollars, while operating profit rose by a good 30 percent to 23.7 billion dollars. Operating cash flow was lower in the three months due to taxes still to be paid. On the other hand, net profit jumped by around 52 percent to 20.7 billion dollars.

Nevertheless, Porat continues to write with the austerity pen: “We remain committed to our mission of resiliently transforming the cost base while investing in opportunities for growth.” Alphabet CEO Sundar Pichai recognizes these in artificial intelligence (AI). The Group's mainstays are advertising revenue from the search engine and YouTube, as well as fee-based cloud services. All three areas are already benefiting from AI, reports Pichai. But the best is yet to come, thanks to the large language models called Gemini, which the Alphabet subsidiary Deepmind is developing.

Financial figures

Of the 86.3 billion dollars in quarterly revenue, 65.5 billion dollars came from advertising (+11%). A further 10.8 billion dollars came from subscriptions, device sales and other Google offerings (+23%). Cloud services generated 9.2 billion dollars in revenue (+26%). At 657 million dollars, other bets contributed comparatively little, but generated the largest growth (+191%).

In terms of operating profit for the fourth quarter, Google Cloud managed to turn around from a loss of 186 million dollars to a profit of 864 million dollars. Other Bets reduced its operating losses by a good 30 percent to 863 million. The numerous Google offerings continue to be the driving force, with operating profit increasing by almost a third to 26.7 billion dollars.

In regional terms, Alphabet continues to generate almost half of its consolidated revenue in the USA (42 billion dollars, +13.6%). Europe, the Middle East and Africa contribute 25 billion dollars (+14.9%), Asia including the Pacific region 14 billion dollars (+16.7%), and the Americas excluding the USA 5.2 billion dollars (+11.2%).

Share price falls

Overall, the quarterly results exceeded analysts' expectations. The figures show that Google's advertising business is growing again – in the comparable quarter of 2022 there was a minus. Other revenues are growing faster and thus gaining in importance. This diversification may be strategically advantageous, but institutional investors are clearly not impressed. In after-hours trading following the announcement of the quarterly figures, Alphabet shares traded around seven percent lower.

Full year 2024

In the full year 2024, Alphabet's turnover will exceed the 300 billion dollar threshold. The revenue growth of 8.7 percent raises the figure to 307.4 billion dollars. At the same time, the company is becoming more efficient. Operating profit grew by 12.6 percent to 84.3 billion dollars.

Alphabet also surpassed a round figure in terms of operating cash flow, namely 100 billion dollars. Here, an increase of 11.2 percent means no less than 101.7 billion dollars. Net profit for the year even jumped by 23 percent to 73.8 billion dollars. The number of Group employees fell by around 7,700 over the course of the year to around 182,500 at the end of the year. This is also part of Google's cost-cutting program.

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