Alphabet $GOOGL 4Q23 Earnings
- Rev $86.3b +13% โ๏ธ๐ก
- EBIT $23.7b +30% โ๏ธ margin 27% +358 bps โ
- Net Inc $20.7b +52% โ๏ธ margin 24% +605 bps โ
- OCF $18.9b -20% โ๏ธ margin 22% -914 bps โ๏ธ๐ด
- FCF $7.9b -51% โ๏ธ margin 9% -1192 bps โ๏ธ๐ด
*lower OCF and FCF due to timing of $10.5bn tax payment in Oct
Alphabet $GOOGL FY23 Earnings
- Rev $307.4b +9% โ๏ธ๐ก
- EBIT $84.3b +13% โ๏ธ margin 27% +96 bps โ
- Net Inc $73.8b +23% โ๏ธ margin 24% +280 bps โ
- OCF $101.7b +11% โ๏ธ margin 33% +75 bps โ
- FCF $69.5b +16% โ๏ธ margin 23% +139 bps โ
4Q23 Revenue by Segment
- Google Search $48b +13% โ๏ธ๐ก
- YouTube Ads $9.2b +16% โ๏ธ๐ข
- Google Network $8.3b -2% โ๏ธ๐
- Google Ads $65.5b +11% โ๏ธ๐ก
- Google Subscriptions $10.8b +23% โ๏ธ๐ข
- Google Svcs $76.3b +12% โ๏ธ๐ก
- Google Cloud GCP $9.2b +26% โ๏ธ๐ข
- Other Bets $0.7b +191% โคด๏ธ
4Q23 Segment EBIT Profitability
Google Services (88% revenue, >100% EBIT)
- Rev $76.3b +12% โ๏ธ๐ก
- EBIT $26.7b +32% โ๏ธ๐ข margin 35% +522 bps โ
Google Cloud (faster growth, improving profitability)
- Rev $9.2b +26% โ๏ธ๐ข
- EBIT $864m โคด๏ธ margin 9% +1194 bps โ
Other Bets (no signs)
- Rev $657m +191% โคด๏ธ
- EBIT -$863m โคด๏ธ margin -131% +41599 bps โ
4Q23 Rev by Geography
- US $42b +14% โ๏ธ๐ก
- EMEA $25b +10% โ๏ธ๐ก
- APAC $14bn +17% โ๏ธ๐ข
- Other Americas $5b +13% โ๏ธ๐ก
- Rev $86.3b +13% โ๏ธ๐ก
- EBIT $23.7b +30% โ๏ธ margin 27% +358 bps โ
- Net Inc $20.7b +52% โ๏ธ margin 24% +605 bps โ
- OCF $18.9b -20% โ๏ธ margin 22% -914 bps โ๏ธ๐ด
- FCF $7.9b -51% โ๏ธ margin 9% -1192 bps โ๏ธ๐ด
*lower OCF and FCF due to timing of $10.5bn tax payment in Oct
Alphabet $GOOGL FY23 Earnings
- Rev $307.4b +9% โ๏ธ๐ก
- EBIT $84.3b +13% โ๏ธ margin 27% +96 bps โ
- Net Inc $73.8b +23% โ๏ธ margin 24% +280 bps โ
- OCF $101.7b +11% โ๏ธ margin 33% +75 bps โ
- FCF $69.5b +16% โ๏ธ margin 23% +139 bps โ
4Q23 Revenue by Segment
- Google Search $48b +13% โ๏ธ๐ก
- YouTube Ads $9.2b +16% โ๏ธ๐ข
- Google Network $8.3b -2% โ๏ธ๐
- Google Ads $65.5b +11% โ๏ธ๐ก
- Google Subscriptions $10.8b +23% โ๏ธ๐ข
- Google Svcs $76.3b +12% โ๏ธ๐ก
- Google Cloud GCP $9.2b +26% โ๏ธ๐ข
- Other Bets $0.7b +191% โคด๏ธ
4Q23 Segment EBIT Profitability
Google Services (88% revenue, >100% EBIT)
- Rev $76.3b +12% โ๏ธ๐ก
- EBIT $26.7b +32% โ๏ธ๐ข margin 35% +522 bps โ
Google Cloud (faster growth, improving profitability)
- Rev $9.2b +26% โ๏ธ๐ข
- EBIT $864m โคด๏ธ margin 9% +1194 bps โ
Other Bets (no signs)
- Rev $657m +191% โคด๏ธ
- EBIT -$863m โคด๏ธ margin -131% +41599 bps โ
4Q23 Rev by Geography
- US $42b +14% โ๏ธ๐ก
- EMEA $25b +10% โ๏ธ๐ก
- APAC $14bn +17% โ๏ธ๐ข
- Other Americas $5b +13% โ๏ธ๐ก
1 | Strong quarter - led by vertical retail, APAC, YouTube ads, and subscriptions
In Google advertising, Search and other revenues grew +13% YoY, led again by solid growth in the retail vertical.
We had particular strength in retail in APACโฆYouTube ads revenue were up 16% YoY driven by growth in direct response and brand.
In subscriptions, platforms and devices, which was previously named Google Other, YoY revenues increased 23% driven by strong growth in subscriptions.
2 | Search was strong in retail
Retail was a highlight. We continue to see a stronger start to the season up to and including Cyber Five.
Our proven AI-powered ad solutions were also a win for retailers looking to accelerate omni growth and capture holiday demand.
3 | All about AI powering ads, which is core to Alphabet for a long time
AI has been at the core of our advertising products for a very, very long time. And the recent advances are really allowing us to drive more value for advertisers across a large range of different areas: bidding, targeting, creative as well as our core advertiser and publisher experiences.
4 | AI powering creators in YouTube, drive more content, more viewers, more advertisers
I'll reiterate what I have said before: YouTube's success starts with creator success. We give millions of creators more ways to create content and connect with fans and more ways to make money and build their own businesses than any other platform.
More creators means more content, which leads to more viewers. And via ads and subscriptions, these viewers fund our creators and drive the eyeballs and engagement our advertisers want.
5 | Making it easier with more and better tools for YouTube creators, GenAI helping lots
We've invested in a full suite of tools, including our new YouTube Create app for Shorts, to help people make everything from 15-second Shorts to 15-minute videos to 15-hour live streams with a production studio in the palm of their hands.
GenAI is supercharging these capabilities. Anyone with a phone can swap in a new backdrop, remove background extras, translate their video into dozens of languages, all without a big studio budget. We're excited about our first products in this area from Dream Screen for AI-generated backgrounds to Aloud for AI-powered dubbing.
6 | YouTube Shorts progressing well
On the Shorts monetization side, look, we built Shorts to respond to the huge demand from both creators and viewers for short-form video. And we're very pleased with the growth we've seen. I mentioned 2bn+ logged-in users every month, 70bn in daily views.
Specifically to the monetization question, Shorts monetization continues to progress nicely. In fact, actually, since we introduced revenue sharing for Shorts, the total creator earnings generated from Shorts have increased every month, and we expect this to continue.
7 | Performance Max doing well.
Performance Max remained a bright spot. We're also excited about demand gen momentum. This is our big bet to help social advertisers find and convert consumers via immersive, relevant visual creatives across YouTube, including YouTube Shorts, Gmail and Discover.
Tens of thousands of advertisers are testing and on average seeing 6% more conversions per dollar versus image-only ads and discovery campaigns.
8 | CTV - 30sec non-skippable ads and send to phone experience
We've rolled out CTV-first formats like 30-second nonskippable ads and pause experiences as well as an industry-first send-to-phone experience that lets people use a second screen to engage with ads.
9 | Thinks NFL help to solidify YouTubeโs position as must-have app on TV set
NFL Sunday Ticket supports our long-term strategy and really help solidify YouTube's position as a must-have app on everyone's TV set.
On the ad side, as you know, advertisers can buy from an NFL lineup as part of our YouTube Select portfolio. And this actually allows advertisers to reach football fans across YouTube's pretty unique breadth of NFL content
10 | >70% of GenAI unicorns are using GCP
And as you saw that greater than 70% of GenAI unicorns are using Google Cloud. And so I think it's an area where our strengths will continue to play out as we go through FY24, especially when I look at innovation ahead from us on the AI front.
11 | Expect persistently elevated CAPEX in technical infrastructure due to broad LT opportunity in AI
โฆ.CapEx of $11 billion in Q4, as I indicated, was overwhelmingly investment in our technical infrastructure. To your question, there was no onetime item in there.
It really reflects is our outlook for everything Sundar and Philipp and I have been talking about, the extraordinary applications of AI within Google DeepMind, Google Services, Google Cloud, it's across the board for users, for advertisers, developers, cloud enterprise customers, governments. And it's really the long-term opportunity that offers.
So last quarter, we did note that CapEx would continue to grow in 2024. We do expect 2024 full year CapEx to be notably larger than 2023.
12 | Expect another $700m of severance expenses in 1Q24
At this point in the quarter, we do estimate that severance-related expense will be roughly $700 million in the first quarter as we've continued these efforts.
13 | $70bn buybacks vs $1.9T current market cap provide ~3.5% of shareholder returns
For FY23, FCF was $69bn. We repurchased a total of $62bn of our Class A and C shares in 2023 and ended the year with $111bn in cash and marketable securities.
14 | Positive on Outlook of Search and Youtube advertising
With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base.
โก๏ธ Final Takeaways on Alphabet $GOOGL:
Growth rates rebounding. Core business Search / YouTube growing at low double digits versus GCP Cloud growing faster with improving profitability. Like the continued focus on costs and efficiency, allowing margins to recover, and reinvestment into AI data Center infrastructure looks set to continue for the OG in AI to continue to innovate in the coming years.
In Google advertising, Search and other revenues grew +13% YoY, led again by solid growth in the retail vertical.
We had particular strength in retail in APACโฆYouTube ads revenue were up 16% YoY driven by growth in direct response and brand.
In subscriptions, platforms and devices, which was previously named Google Other, YoY revenues increased 23% driven by strong growth in subscriptions.
2 | Search was strong in retail
Retail was a highlight. We continue to see a stronger start to the season up to and including Cyber Five.
Our proven AI-powered ad solutions were also a win for retailers looking to accelerate omni growth and capture holiday demand.
3 | All about AI powering ads, which is core to Alphabet for a long time
AI has been at the core of our advertising products for a very, very long time. And the recent advances are really allowing us to drive more value for advertisers across a large range of different areas: bidding, targeting, creative as well as our core advertiser and publisher experiences.
4 | AI powering creators in YouTube, drive more content, more viewers, more advertisers
I'll reiterate what I have said before: YouTube's success starts with creator success. We give millions of creators more ways to create content and connect with fans and more ways to make money and build their own businesses than any other platform.
More creators means more content, which leads to more viewers. And via ads and subscriptions, these viewers fund our creators and drive the eyeballs and engagement our advertisers want.
5 | Making it easier with more and better tools for YouTube creators, GenAI helping lots
We've invested in a full suite of tools, including our new YouTube Create app for Shorts, to help people make everything from 15-second Shorts to 15-minute videos to 15-hour live streams with a production studio in the palm of their hands.
GenAI is supercharging these capabilities. Anyone with a phone can swap in a new backdrop, remove background extras, translate their video into dozens of languages, all without a big studio budget. We're excited about our first products in this area from Dream Screen for AI-generated backgrounds to Aloud for AI-powered dubbing.
6 | YouTube Shorts progressing well
On the Shorts monetization side, look, we built Shorts to respond to the huge demand from both creators and viewers for short-form video. And we're very pleased with the growth we've seen. I mentioned 2bn+ logged-in users every month, 70bn in daily views.
Specifically to the monetization question, Shorts monetization continues to progress nicely. In fact, actually, since we introduced revenue sharing for Shorts, the total creator earnings generated from Shorts have increased every month, and we expect this to continue.
7 | Performance Max doing well.
Performance Max remained a bright spot. We're also excited about demand gen momentum. This is our big bet to help social advertisers find and convert consumers via immersive, relevant visual creatives across YouTube, including YouTube Shorts, Gmail and Discover.
Tens of thousands of advertisers are testing and on average seeing 6% more conversions per dollar versus image-only ads and discovery campaigns.
8 | CTV - 30sec non-skippable ads and send to phone experience
We've rolled out CTV-first formats like 30-second nonskippable ads and pause experiences as well as an industry-first send-to-phone experience that lets people use a second screen to engage with ads.
9 | Thinks NFL help to solidify YouTubeโs position as must-have app on TV set
NFL Sunday Ticket supports our long-term strategy and really help solidify YouTube's position as a must-have app on everyone's TV set.
On the ad side, as you know, advertisers can buy from an NFL lineup as part of our YouTube Select portfolio. And this actually allows advertisers to reach football fans across YouTube's pretty unique breadth of NFL content
10 | >70% of GenAI unicorns are using GCP
And as you saw that greater than 70% of GenAI unicorns are using Google Cloud. And so I think it's an area where our strengths will continue to play out as we go through FY24, especially when I look at innovation ahead from us on the AI front.
11 | Expect persistently elevated CAPEX in technical infrastructure due to broad LT opportunity in AI
โฆ.CapEx of $11 billion in Q4, as I indicated, was overwhelmingly investment in our technical infrastructure. To your question, there was no onetime item in there.
It really reflects is our outlook for everything Sundar and Philipp and I have been talking about, the extraordinary applications of AI within Google DeepMind, Google Services, Google Cloud, it's across the board for users, for advertisers, developers, cloud enterprise customers, governments. And it's really the long-term opportunity that offers.
So last quarter, we did note that CapEx would continue to grow in 2024. We do expect 2024 full year CapEx to be notably larger than 2023.
12 | Expect another $700m of severance expenses in 1Q24
At this point in the quarter, we do estimate that severance-related expense will be roughly $700 million in the first quarter as we've continued these efforts.
13 | $70bn buybacks vs $1.9T current market cap provide ~3.5% of shareholder returns
For FY23, FCF was $69bn. We repurchased a total of $62bn of our Class A and C shares in 2023 and ended the year with $111bn in cash and marketable securities.
14 | Positive on Outlook of Search and Youtube advertising
With respect to Google Services, first, within advertising. We were pleased with the sequential revenue growth of Search and YouTube advertising throughout 2023, which reflects the extraordinary work across our teams to drive improved experiences for users and attractive ROI for advertisers. As we enter 2024 with advertising revenues of more than $100 billion higher than 2019, we remain focused on sustaining healthy growth on this larger base.
โก๏ธ Final Takeaways on Alphabet $GOOGL:
Growth rates rebounding. Core business Search / YouTube growing at low double digits versus GCP Cloud growing faster with improving profitability. Like the continued focus on costs and efficiency, allowing margins to recover, and reinvestment into AI data Center infrastructure looks set to continue for the OG in AI to continue to innovate in the coming years.
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