GOOGL Stock: Google Earnings Beat but Ad Growth Disappoints Amid Artificial AGI Concerns

GOOGL Stock: Google Earnings Beat but Ad Growth Disappoints Amid Artificial AGI Concerns

Google Parents the alphabet (GOOGL) reported fourth-quarter earnings and revenues that exceeded consensus estimates. But GOOGL stock fell as its core advertising business lost views slightly amid concerns about how the rise of generative artificial intelligence will impact online search.




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Reported after the market closed on Tuesday, Google’s earnings for the quarter ended December 31 jumped 56% to $1.64 per share. The tech giant reports Google’s earnings under generally accepted accounting principles, also known as GAAP.

In the fourth quarter, Google’s total revenues rose 13% to $86.31 billion. Cloud computing revenue growth has reaccelerated and exceeded estimates. Analysts surveyed by FactSet had expected earnings per share of $1.60 on revenue of $85.25 billion.

GOOGL STOCK: Bear Case Ammo?

Also, Google’s ad revenue for the fourth quarter rose 11% to $65.52 billion, slightly below estimates of $65.82 billion. One view is that the emergence of generative artificial intelligence and Microsoft MSFT’s alliance with startup Open AI will change how big brands buy digital advertising.

“AI’s impact on search remains the No. 1 reason for Google shares, and this quarter will not alleviate that concern, in our view,” RBC Capital analyst Brad Erickson said in a report. He added that Google’s capital spending guidance in 2024 was much higher than expected.

“The capex guide is like whoa,” Erickson added. “Management has guided to significantly increase capital expenditures in 2024 versus a 2023 comment of ‘modestly higher’.” “For us, (this) gives the impression that the capital intensity of new generation AI takes management a bit by surprise. Given that the company is still in the phase of rolling out AGI tools for research in particular, it can be said that it is a case of low capital expenditure intensity. “The state of play at this point.”

Erickson holds an outperform rating on GOOGL stock.

Google Stock: The Pulse of Cloud Growth

Google said cloud computing revenues rose 25% to $9.19 billion, beating estimates of $8.94 billion. Google’s cloud computing business posted 22% growth in the September quarter.

Meanwhile, YouTube ad revenue rose 15% to $9.2 billion, in line with estimates.

On the stock market today, GOOGL stock fell 5.6% to close to 143 points in early trading.

“We would note that this was a fundamentally stronger quarter, with total revenue, search, YouTube, cloud and other Google revenue accelerating on a quarter-over-quarter basis,” Evercore ISI analyst Mark Mahaney said in a report. “However, we believe that post-print price movements reflect high expectations that were not exceeded,” he added.

In the fourth quarter, Google bought back $16.2 billion worth of its own stock. In the September quarter, it repurchased $15.78 billion.

Google’s traffic acquisition costs in the fourth quarter also rose 8% to $13.98 billion. Google payments related to internet searches to apple (AAPL) is a key case in the Justice Department’s antitrust lawsuit against Alphabet.

Google stock performance

Google rebounded from the sell-off after it reported results for the September quarter 2023. GOOGL shares sold off 13% on October 25, the first day of trading after the third-quarter report. Shares hit a low of 121.46 on October 27. But Google shares continued to rise 26% over the next three months ahead of Google’s fourth-quarter earnings report today.

As Google’s earnings report approaches, Alphabet shares are up 9% in 2024. In 2023, Google shares are up 58% in 2023, though other big tech stocks – Meta platforms (dead), Amazon.com (Amzn) and Netflix (NFLX) performed better.

Also, GOOGL stock carries a Relative Strength Rating of 89 out of a top 99, according to IBD Stock Screener.

Meanwhile, Google stock is extending and trading above the buy zone.

Follow Reinhart Krauss on X, formerly known as Twitter, @reinhardtk_tech For updates on artificial intelligence, cybersecurity, and cloud computing.

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