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3 Feb, 2023
2 min time to read

The revenue experienced only a 1% increase compared to the previous year despite strong performance on YouTube and Pixel devices.

In his latest earnings announcement, Alphabet CEO Sundar Pichai highlighted the company's progress in cloud services, YouTube subscriptions, and Pixel devices. However, a closer look at the numbers reveals a different story. During the crucial holiday quarter, the company's revenue remained stagnant compared to the previous year, with decreased margins.

In 2021, Alphabet, Google's parent company, saw impressive growth, with multiple quarters of record profits. But as 2022 progressed, its growth slowed and profits declined. The company generated $283 billion in revenue in 2022, a 10% increase from the previous year, but with 41% growth in 2021, the rate of revenue growth more than halved. The company's profits also dropped from $76 billion in 2021 to $60 billion in 2022, a decrease of 21%.

Google's Q4 2022 results were underwhelming, with a 1% increase in revenue ($76 billion) compared to the same quarter in 2021. Profit also decreased, with a figure of $13.6 billion compared to $20.6 billion in 2021. The margin was also lower, at 24% compared to 29% in the previous year.

Several major sources of revenue saw a decline, including a $2 billion drop in advertising and a $1.5 billion decrease in services (which includes products such as Android, Chrome, Google Maps, Google Play, and YouTube). On the other hand, Google increased its investment in research and development by over $1.5 billion.

Unfortunately, the company does not provide specific revenue information for the Cloud, YouTube Subscriptions, and Pixels. However, Google did see a reduction in losses in the Cloud segment, with $480 million in losses compared to $890 million in Q4 2021. On the other hand, there was a decrease of approximately $670 million in YouTube advertising revenue. However, the company did raise the price of its family plan for YouTube Premium in October.

In Q3's earnings call last October, CFO Ruth Porat mentioned that the company would slow down its hiring pace and this would be evident in 2023. That prediction has come true, as earlier this month CEO Sundar Pichai announced the layoff of 12,000 employees, citing the need to focus and the challenging economic environment. The company estimates the cost of severance to be between $1.9 billion and $2.3 billion.

The recent events at Alphabet will likely have far-reaching consequences. In the next year or more, the company will face major challenges, including a lawsuit from the Department of Justice alleging monopoly power in online advertising, another lawsuit over its search dominance, and the growing threat of AI chatbots. Additionally, the company has just launched its YouTube Shorts revenue sharing program to compete with TikTok.