Alphabet, the parent company of Google, has shared its earnings report for Q4 2022 and fiscal year 2022. The tech behemoth saw slower revenue growth this past quarter as well as the whole of last year. Its profit margin was also down from the previous year.
Google struggled to grow in 2022
According to Google, its consolidated sales revenue for the fourth quarter of 2022 was $76.05 billion, negligibly more than the $75.3 billion it made during the same period a year ago. The company’s revenue grew 32% in the year-ending quarter of 2021. Its revenue remaining flat during the last holiday quarter tells you the story of struggles in the tech industry. Google and the likes had an incredible run during the coronavirus pandemic, posting several record financial quarters in a row.
To make things worse, companies are also suffering a big hit in profit margins. Google reported a net income of $13.62 billion this past quarter. That translates to an EPS (earnings per share) of just $1.05. In Q4 2021, the company took home $20.64 billion, or $1.53 per share. The numbers for the full year 2022 aren’t any better. The Android maker generated a revenue of $282.84 billion last year. That marks a ten% YoY (year-over-year) growth. Its growth rate in 2021 was a staggering 41%.
Coming back to profits, Google made $59.97 billion in net income in 2022 ($4.56 per share). That figure for 2021 was $76.03 billion, or $5.61 per share. This decline is due to a global economic downturn which has affected that company’s core business, i. e. advertising. It generated less revenue from Search, YouTube ads, and Google Network in Q4 2022 than in Q4 2021. Overall revenue from the advertising business was down about $2.2 billion YoY.
Other Google products and services, which include the Pixel hardware lineup, Android, Chrome, and more, fared marginally better, though. Google Cloud was a standout performer last quarter, generating nearly $2 billion more revenue than a year before. Operating losses also almost halved to $480 million. No wonder Google CEO Sundar Pichai began the earnings announcement by saying that the company has “great momentum in Cloud, YouTube subscriptions, and our Pixel devices”.
Competition is growing in Google’s core business
The ongoing global economic headwinds may be to blame for Google’s poor financial performance in 2022. However, the company has also been facing stiffer competition in its core business lately. A company executive previously said that the young generation is increasingly using platforms like TikTok and Instagram to search for places and other points of interest instead of Google Search and Maps. The emergence of ChatGPT is now being touted as a massive threat to Search as a whole.
Recent developments have now made Google “re-engineer” its cost structure. According to Google CEO Sundar Pichai, the company is looking to build “financially sustainable, vibrant, [and] growing businesses” with a durable cost structure. The firm has already reduced its global workforce by about six percent, cutting around 12,000 jobs. It has also killed all but three Area 120 projects and is reducing its office sizes to cut operational costs in the long run.
Going forward, Pichai said Google is preparing to unveil “AI-driven leaps” in Search and beyond. It sounds like a rival to ChatGPT. Google’s AI subsidiary DeepMind is said to be working on this project, allegedly called Sparrow. “Our long-term investments in deep computer science make us extremely well-positioned as AI reaches an inflection point,” he said. We should get to hear more about the company’s plans in the coming months.