A Tale of Two YouTubes: Ads Down, Subs Showing ‘Momentum’ as Alphabet Revenue Stalls

Google’s parent company brought in $76 billion, slightly missing on Wall Street expectations

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Alphabet Inc. reported Thursday that revenues stalled in the fourth quarter of 2022, though up significantly for the full year. Profits shrank as expenses grew, though CEO Sundar Pichai sought to reassure shareholders that its “investments in deep computer science” made it “well-positioned as AI reaches an inflection point.”

Google’s parent company saw $76 billion in revenues in the fourth quarter, a 1% increase over the same period in 2021, and $283 billion for the full year 2022, a 10% increase over the prior year. YouTube ad revenue dropped to $7.96 billion in the fourth quarter of 2022 from $8.6 billion in the prior year, although Pichai mentioned “momentum” with YouTube subscriptions in a press release announcing earnings.

“I’m excited by the AI-driven leaps we’re about to unveil in Search and beyond,” Pichai said in the release. “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.” Alphabet laid off 12,000 employees, or 6% of its global workforce, in January.

Alphabet’s earnings fell below Wall Street’s expectations for quarterly profit and revenue as it grappled with a digital ad business slowdown amid economic conditions that “choked corporate spending and triggered mass layoffs,” according to Reuters.

MarketWatch reported analysts polled by FactSet expected Alphabet to report revenue of $76.2 billion and earnings of $1.18 per share for the fourth quarter. Alphabet instead delivered earnings of $1.05 per share, down from $1.53 in 2021. For the full year 2022, EPS were $4.56, down from $5.61 in 2021.

FactSet’s analysts had forecast YouTube revenue at $8.25 billion, indicating a shortfall at the video site which dragged down overall performance.

Jesse Cohen, a senior analyst with Investing.com, told MarketWatch that “the search giant underperformed our expectations across almost all business units, most importantly its core ad search segment.” He added that “YouTube growth slowed to a crawl amid tough competition from TikTok and other players in the video-streaming space.”

Shares of Alphabet were down nearly 5% in after-hours as they hovered around $104, having shed 40% of their value in 2022.