The Six Five team discusses Google Earnings.
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Transcript:
Daniel Newman: So Google was the tale of the other. And Google, let’s be very clear, Google had a good result. I said Google was good; Microsoft was great. But in an economy where people are pretty skeptical, and we’re kind of on stilts, and we’ve got the interest and inflation, and we’ve got politics and war and all the things going on, good unfortunately doesn’t cut it. But you’re talking about a company that showed stability in its advertising, stability in its YouTube business, stability in its cost controls. It beat on the top. It beat on the bottom, and it missed… I’m not joking. Guess how much it missed its Google Cloud number by?
Patrick Moorhead: 20 million.
Daniel Newman: $20 million.
Patrick Moorhead: Yeah.
Daniel Newman: You’re talking around like high hundreds of millions. Like, almost one of those where you’re like, “Didn’t they have anything they could bill?”
Patrick Moorhead: Right. Couldn’t you pull in a deal or something?
Daniel Newman: Pull in one deal at the end. And I mean, I know, this is how you know this stuff’s real, is that sometimes it does work that way when numbers are this big. But having said that, Pat, look, I went on and I was talking to CNBC about this, and I basically said, “This is a company that I’m seeing real customers, real innovation, real product, real GA. We’ve had time with Thomas Kurian. They’ve moved to profitability. They’re growing the company successfully. This is not end-of-day stuff.” They grew 22% in the cloud.
Patrick Moorhead: Right.
Daniel Newman: 22%. Yes, Microsoft grew faster. Microsoft took share. And AWS grew 12%. And obviously, it’s always about the guide. AWS is much bigger, so when you’re $80 billion a year plus… But the point is, is that all these companies are different stages. All these companies measure things differently. But here’s why Google got hammered. I don’t think it’s the early AI setback. The early AI setback, I think, they’ve overcome. My personal belief.
Patrick Moorhead: They did. And if you look at the charts from Microsoft and Google, they brought that in.
Daniel Newman: They railed that in. But I do think their ability to describe their monetization, whether it’s Duet, whether it’s Google Cloud, it just wasn’t there. It wasn’t there. And like I said, it was a flawless execution from Satya Nadella and Microsoft. And it was a very kind of run-of-the-mill earnings presentation, which was fine with good numbers. But the difference right now is when people are going to put a dollar somewhere, they want to be blown away. And when it comes to AI, Open AI, the Copilot story, Microsoft has just done a bit better work so far. But I’m not ruling Google out. I really like what Google’s done. In the time I’ve spent with them, I think they’ve come a long, long way, baby. And I think it’s going to be okay from here. This was not end of days for Google.
Patrick Moorhead: That was a good analysis, Dan. I think the clawback had a lot to do with expectations. And I think it’s a natural thing that when you think of generative AI, you would think of a company like Google. And I think that investors were just disappointed that the numbers weren’t a whole lot bigger. So the expectation was that they’re going to be able to take advantage of generative AI, and based on those expectations, they didn’t. The reality is they had a really good quarter. And quite frankly, I think investors should have been happy that the advertising business didn’t crater given the state of the global economy.
Daniel Newman: It was good.
Patrick Moorhead: Right?
Daniel Newman: It was good.
Patrick Moorhead: I mean, and the fact that they came back with YouTube really well, I thought, was super impressive. On the search part, it really… How are you going to gain if you Google on search versus Bing, right? And Bing, they announced another share gain on that and the Edge browser. And if you’re not using Edge, you’re using Chrome. Now, investors didn’t know that because it was a day later. But again, and that’s what brings me to the point that this is all about expectation. They have brought Duet into Workspace, but then again, the percentage of revenue and the amount of revenue they drive out of that is somewhat inconsequential compared to hardcore Google Cloud has-
Daniel Newman: Negligible.
Patrick Moorhead: … has versus the overall advertising business. That’s all I got.
Daniel Newman: Yeah, I think you said that really well. And I think we’re going to see continued progress, but it’s hard to compete with near perfect.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
