Google reports Q32023 earnings after market close today. Revenue was $76.69B vs. $75.97B expected. EPS was $1.55 vs. $1.45 expected. YouTube ad revenue was $7.95B vs. $7.81B expected. YouTube ad revenue grew 12.46% YoY in Q3 vs. 4.5% in Q2 and -2.6% in Q1. Google Cloud revenue was $8.41B vs. $8.64 expected. Google Cloud revenue grew 22.47% YoY in Q3 vs. 28% in Q2 and 28% in Q1. Google Search revenue grew 11.35% YoY in Q3 vs. 4.77% in Q2 and 1.87% in Q1. Despite solid beat, $GOOGLE stock tanked 6% after the report, perhaps due to disappointing Google Cloud revenue.
It’s worth noting that despite laying off 12,000 people in January, Google’s headcount barely changed. It appears that Google continues to hire more people after the layoffs. I don’t quite understand the rationale but it’s likely they are putting more focus on areas like AI and search and divest from other areas.
Overall, Google’s result is pretty good with the double digit revenue growth. Although Q3 last year was a very difficult quarter for Google with YouTube and AdSense revenue down YoY, the 11% growth could be attributed to a more depressed baseline. In the long run, it’s more likely that Google’s ad revenue growth will settle in the high single digit level, matching the ~9% CAGR of the internet advertising market assuming Google’s search business remains intact from the threats of ChatGPT type of information retrieval services.
At 20x fcf they are fairly priced relative to market if they can maintain 10%+ growth.
Their revenue is pretty seasonal. If you do a historic Q2 to Q3 growth compare they are growing below trend in these quarters at less than 5% QoQ. It's a super rough compare.
Cloud definitely disappointing relative to msft. Msft guided slower cloud growth rate next quarter.
Honestly the bar seems to be pretty high so far this quarter. Big beats seem to be needed to hold up SP and a hit has been like a miss.