1/30/2024: Google Q4 Earnings Beat Expectations

Google reports Q4 2023 earnings after market close today. Revenue was $86.31B vs. $85.33B expected. EPS was $1.64 vs. $1.59 expected. Google ad revenue was $65.52B vs. $65.8B expected. YouTube ad revenue was $9.2B vs. $9.21B expected. YouTube ad revenue grew 15.53% YoY in Q4 vs. 12.46% in Q3, 4.5% in Q2 and -2.6% in Q1. Google Cloud revenue was $9.19B vs. $8.94B expected. Google Cloud revenue grew 25.66% YoY in Q4 vs. 22.47% in Q3, 28% in Q2 and 28% in Q1. Google Search revenue grew 12.7% YoY in Q4 vs. 11.35% in Q3, 4.77% in Q2 and 1.87% in Q1. GOOGL 0.00%↑ stock fell 4% after the report, perhaps due to the slight miss on ad revenue.

Google Cloud revenue growth accelerated in Q4 and Google Cloud is now solidly profitable, generating $864M of operating income in Q4. Though, the company did change the depreciation schedule of server and network equipment from 4 years to 6 years starting FY2023 so the “profitability” might be a bit misleading. Regardless, Google is definitely riding the AI wave through its cloud services. But I believe the big worry on investors’ minds is whether ChatGPT-like applications would disrupt Google’s $200B a year search business. Their search business looks fine at the moment but there is definitely a shift of user behavior happening. Anecdotally, clicking through Google search results is a pretty poor experience for me these days. It was cluttered with sponsored links and irrelevant sometimes scammy destinations. (Try searching “DMV renewal” on Google. Top result is not the actual government DMV website but some kinda scammy arbitrage website. Do better, Google.) I mostly get what I want through a mix of ChatGPT/Bard, Perplexity, Amazon product search, YouTube search and site:reddit.com search these days. I wonder how long Google can keep its search product this way. They can probably be like this for another year or two but I don’t think they can continue like this for another 5 years with the secular shift caused by generative AI.