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Ad Income Of Google Parent Alphabet Is Down, CapEx Is Up, And Shares Are Down 6%

Ad Income Of Google Parent Alphabet Is Down, CapEx Is Up, And Shares Are Down 6%
Wall Street was let down by Alphabet when the business announced that this year it would be spending more on things like servers that would fuel artificial intelligence, despite the fact that holiday-season advertising sales fell short of forecasts.
After hours trading saw a 6% decline in Alphabet shares.
Alphabet's dominant businesses, Google and YouTube, have been up against competition for advertising budgets from other online platforms like Facebook, Instagram, TikTok, and, all against the backdrop of conflicting U.S. economic indications.
The company's fourth-quarter ad revenue increased to $65.5 billion from $59.0 billion the previous year, with retail sales being a bright light. Based on LSEG statistics, that fell short of analysts' average projection of $66.1 billion.
"Alphabet's disappointing ad revenue numbers suggest that corporations worldwide are still uncertain about the pace of interest rate cuts from global central banks," said Thomas Monteiro, an analyst at
Google, the creator of the technology that laid the groundwork for the current AI boom, is engaged in conflict with two major competitors in the market: OpenAI, the company that created ChatGPT, and Microsoft, which supports it.
Microsoft's Azure grew faster in the same period that Google Cloud's revenue exceeded Wall Street forecasts and growth resumed with a boost from AI.
Such AI demands significant investments in data centres, servers, and research. Alphabet's capital expenditures surged by 45% to $11 billion, the biggest level in years. During a conference call with analysts, Chief Financial Officer Ruth Porat stated that this year's capital expenditures will be significantly higher than those of 2023.
Technology companies have been reducing staff and shutting down non-priority initiatives in order to save expenses.
According to Porat, Alphabet anticipates spending $700 million on severance-related costs in the first quarter.
Google is giving its ChatGPT competitor Bard access to a potent model suite dubbed Gemini. A agreement to invest up to $2 billion in the well-known AI firm Anthropic was also made, as it attempts to lure clients away from more established cloud rivals Microsoft and Amazon. Additionally, it is giving advertisers control over Gemini to maintain their financial support for Google's search division.
However, because ad purchasers may be deterred by geopolitical and economic uncertainties, AI's boost to advertising may still be some way off. Alphabet's AI initiatives are being investigated by the US, and Google is preparing to file an appeal of a significant antitrust case it lost.
Alphabet reported $20.7 billion in profit for the fourth quarter.
During the analyst call, Alphabet CEO Sundar Pichai highlighted the advancements made with AI in various areas of the company, such as posing new queries that Google can skillfully handle.
Since OpenAI's November 2022 announcement of ChatGPT, which demonstrated to the public how so-called generative AI can create fresh text and graphics with a single command, a frenzy has engulfed the technology industry. The possibility of AI "agents" managing human demands with more autonomy has also increased with advancements.
When asked about Google Assistant, the company's digital assistant, Pichai stated that artificial intelligence (AI) "allows us to act more like an agent over time" and "go beyond answers and follow through for users even more."
Investor interest in Google Cloud has increased as Alphabet concentrates on artificial intelligence.
The segment turned a quarterly profit for the first time last year, but as clients reduced their cloud expenditure, sales growth slowed.
While Google has promoted competing technologies, Microsoft has been a formidable foe, integrating AI into its cloud and productivity suite, which has long been adopted by corporations.
Pichai informed investors that cloud expansion was being encouraged by generative AI. With $9.2 billion in sales for the most recent quarter, Google Cloud exceeded analyst projections of $8.9 billion. While it was less than the 32% growth in the same quarter last year, cloud revenue growth had resumed its upward trajectory from the previous quarter, reaching 25.7%.
Azure, Microsoft's cloud platform, saw a 30% increase in sales, the company announced on Tuesday.
LSEG data shows that Alphabet's total revenue for the quarter ended December 31 was $86.3 billion, versus projections of $85.3 billion.

Christopher J. Mitchell

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