The News: Alphabet recently announced its financial results for the fourth quarter (Q4) and fiscal year (FY) ended December 31, 2022. Q4 2022 consolidated revenues were $76 billion, up 1% year over year (YoY) and FY 2022 revenue is up 10% YoY from FY 2021 results. Read the Alphabet Press Release here.
Alphabet Q4 & FY 2022 Revenue Up YoY Although Macro Issues Persist
Analyst Take: Alphabet recently announced its Q4 2022 and year end 2022 financials. Alphabet’s FY 2022 revenue hit $283 billion which is an increase of 10% from one year ago. Sundar Pichai, CEO of Alphabet and Google, said: “Our long-term investments in deep computer science make us extremely well-positioned as AI reaches an inflection point, and I’m excited by the AI-driven leaps we’re about to unveil in Search and beyond. There’s also great momentum in Cloud, YouTube subscriptions, and our Pixel devices. We’re on an important journey to re-engineer our cost structure in a durable way and to build financially sustainable, vibrant, growing businesses across Alphabet.”
Ruth Porat, CFO of Alphabet and Google said: “Our Q4 consolidated revenues were $76 billion, up 1% year over year, or up 7% in constant currency, and $283 billion for the full year 2022, up 10%, or up 14% in constant currency. We have significant work underway to improve all aspects of our cost structure, in support of our investments in our highest growth priorities to deliver long-term, profitable growth.”
Here are the Alphabet Q4 2022 and full FY2022 earnings by the numbers:
- Q4 2022 revenue of $76 billion which is an increase of 1 percent from $75 billion one year ago.
- Q4 2022 NON-GAAP 7 percent change in constant currency revenues YoY.
- Q4 2022 operating income of $18 billion which is flat from $22 billion one year ago.
- Q4 2022 operating margin of 24 percent, a decrease from 29 percent one year ago.
- Q4 2022 net income of $14 billion which is down from $21 billion one year ago.
- Q4 2022 diluted earnings per share (EPS) of $1.05, down from $1.53 one year ago.
- FY 2022 revenue of $283 billion, up 10 percent from $258 billion one year ago.
- FY 2022 NON-GAAP 14 percent change in constant currency revenues year over year.
- FY 2022 operating income of $75 billion, which is down from $79 billion one year ago.
- FY 2022 operating margin of 26 percent which is down from 31 percent one year ago.
- FY 2022 net income of $60 billion which is down from $76 billion one year ago.
- FY 2022 diluted earnings per share (EPS) of $4.56 which is down from $5.61 one year ago.
Alphabet Q4 2022 and FY 2022: Key Takeaways
The good news is that Google’s Q4 2022 and FY 2022 revenues both grew YoY despite key macro and tech sector issues slowing its growth engine in comparison to its Q4 2021 and FY 2021 revenue results. Google’s consolidated sales revenues for Q4 2022 were $76.05 billion, barely inching out the $75.3 billion generated in Q4 2021. In comparison, during Q4 2021 the company’s revenues grew 32%. Also, Google’s FY 2022 revenue YoY increase of 10% was comparatively modest to FY 2021 revenue YoY growth of 41%.
Moreover, Google’s profit margins dipped noticeably, reporting a net income of $13.62 billion in Q4 2022, which translated to an earnings per share (EPS) of $1.05. In Q4 2021, the company took home a more robust $20.64 billion, or $1.53 per share. In sum Google missed across the by missing on earnings, missing on revenue, missing on YouTube, missing on cloud, although the company saved a little bit on traffic acquisition costs to attain the Q4 2022 1% growth threshold.
Google is not unique in seeing such an impressive run slow considerably as huge swathes of the tech sector adjust to post-pandemic spending pull backs across many key sectors such as mobile devices and online advertising. Google is laying off around 12,000 people to reduce some OpEx costs as well as pull back on some real estate. This aligns more with post-pandemic Street expectations with cloud providers in general sounding more cautious about their prospects in 2023.
Specifically, we see Google Cloud posting 32% YoY growth, although such a performance is somewhat underwhelming as the unit has yet to achieve profitability. From our view, the team remains committed to pursuing an aggressive growth strategy to ultimately match the economies of scale of market leaders AWS and Microsoft Azure before putting more emphasis on profitability.
Of concern is Microsoft’s OpenAI moves and aggressive implementations of ChatGPT fomenting a more formidable competitive threat to Google’s longstanding AI and search engine investments and ecosystem outreach. Plus, we believe Google Cloud needs to sharpen its security message and refresh its collaboration proposition and ecosystem play as we see holes in these areas as potentially hindering Google Cloud’s growth ceiling even during the uncertain macro aspects of 2023. We do find encouraging the decision to start breaking out its revenues in areas such as DeepMind to further demonstrate the portfolio development and fiscal benefits of its AI technology.
Overall, we believe Google can adapt swiftly to the evolving competitive landscape as it executes ongoing post-pandemic portfolio and organizational adjustments. From our view, Google will find a way to use its considerable AI assets to counter new competitive threats from key rivals like Microsoft and help reinvigorate its fiscal performance.
Disclosure: Futurum Research is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum Research as a whole.
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Author Information
Ron is an experienced, customer-focused research expert and analyst, with over 20 years of experience in the digital and IT transformation markets, working with businesses to drive consistent revenue and sales growth.
Ron holds a Master of Arts in Public Policy from University of Nevada — Las Vegas and a Bachelor of Arts in political science/government from William and Mary.
