Alphabet's third quarter revenue was $76.6 billion, with a net profit of 196% year-on-year growth

On October 25th, Google's parent company Alphabet released its financial report for the third quarter of the 2023 fiscal year as of September 30th on Tuesday, local time in the United States. According to the financial report, Alphabet's revenue in the third quarter reached $76

On October 25th, Google's parent company Alphabet released its financial report for the third quarter of the 2023 fiscal year as of September 30th on Tuesday, local time in the United States. According to the financial report, Alphabet's revenue in the third quarter reached $76.693 billion, an increase of 11% year-on-year; The net profit attributable to the parent company was 19.689 billion US dollars, a year-on-year increase of 41.55%; Diluted earnings per share were $1.55, compared to $1.06 in the same period last year. After the financial report was released, Alphabet's cloud computing business performed poorly, resulting in its stock price exceeding 6% in after hours trading.

The following are the key points of Alphabet's third quarter financial report:

Divided by business

Other financial reporting points

cash flow

As of September 30, 2023, the total value of cash, cash equivalents, and convertible securities held by Alphabet was $119.935 billion. As of December 31, 2022, the total value of cash, cash equivalents, and convertible securities held by Alphabet was $113.762 billion.

Executive comments

I am satisfied with our financial performance and product development momentum in the third quarter, as artificial intelligence has driven innovation in areas such as search, YouTube, cloud, Pixel devices, and more. We will continue to strive to make artificial intelligence more helpful for everyone, "said SundarPichai, CEO of Google and its parent company Alphabet

Ruth Porat, President, Chief Investment Officer, and Chief Financial Officer of Google and its parent company Alphabet, said, "The fundamental advantage of our business once again emerged in the third quarter. Driven by significant growth in search and YouTube, as well as cloud computing, our revenue reached $77 billion, an 11% year-on-year increase. We will continue to focus on wise capital allocation to achieve sustainable financial value

Interpretation of financial reports

Alphabet's revenue grew by 11% in the third quarter, with a rebound in advertising business driving revenue growth to double digits for the first time in more than a year. The double-digit revenue growth followed four quarters of single digit growth, as Google's core advertising business weakened due to economic weakness and intensified competition from TikTok last year.

Although advertising spending in industries such as retail and tourism has always been strong, industry executives and analysts have noticed that budgets in some areas have decreased, which has affected Alphabet's main source of revenue. Alphabet's advertising revenue in the third quarter was $59.647 billion, up from $54.482 billion in the same period last year. YouTube's advertising revenue exceeded analysts' expectations, reaching $7.952 billion.

However, in its financial report, Alphabet only listed YouTube's advertising sales, excluding subscription revenue from YouTube TV, YouTube Premium, and YouTube Music, as well as YouTube's exclusive revenue from billions of dollars in NFLSundayTicket off court competition packages.

In the past few years, YouTube has faced more intense competition from the popular short video application TikTok, which has prompted the platform to launch an imitation feature called YouTube Shorts. Currently, over 2 billion users watch YouTube Shorts every month, with an average of over 70 billion YouTube short videos being watched every day. Meanwhile, the company recently announced that it will close Google Podcast in 2024 as it will double its efforts to make YouTube music the preferred destination for podcast creators and listeners.

Concerns about the global economic slowdown have prompted companies to slow down their spending on cloud computing related services, including expensive artificial intelligence tools. This has led to Google's cloud computing division's revenue growth in the third quarter dropping from 28% in the previous three months to 22.5%, which is the slowest growth rate since at least the first quarter of 2021.

Google's cloud computing revenue for the third quarter was $8.41 billion, lower than analysts' consensus expectation of $8.62 billion. The cloud computing department has always been a key investment area for Alphabet as the company attempts to catch up with Amazon AWS and Microsoft Azure. With the emergence of generative artificial intelligence, this business has become even more important as more and more companies are turning to public clouds to run large workloads.

Although the performance of the cloud computing department was disappointing, it still increased by 22% compared to the same period last year, twice the overall growth rate of the company. After a loss of $440 million in the same period last year, the cloud business achieved an operating profit of $266 million. Borat stated in a conference call on Tuesday that the growth of cloud computing business in the third quarter was due to "customer optimization efforts," but she did not provide a detailed explanation.

In contrast, the revenue of Microsoft's intelligent cloud division (which owns the Azure cloud computing platform) increased to $24.3 billion, roughly in line with analysts' consensus expectation of $23.49 billion. Among them, Azure's revenue increased by 29%, higher than the 26.2% growth rate predicted by market research company VisibleAlpha. Microsoft's stock price rose 5% after trading.

Although Alphabet's third-quarter performance exceeded expectations, investors are disappointed with its relatively weak performance in Google's cloud computing business, and the platform may further lag behind Azure and AWS, "said Jesse Cohen, a senior analyst at Investing.com

After the release of OpenAI's chatbot ChatGPT at the end of last year, Google has been working hard to add generative artificial intelligence technology to more products and is testing it in its core search. Generative artificial intelligence can provide more creative and comprehensive answers for simple text queries. If people change the way they search for information online, it may have a significant impact on Google's search and advertising business.

Alphabet's "other bets", including Waymo, the autonomous vehicle business, and Verily, the life science department, reported revenue of $297 million, up from $209 million last year. However, Alphabet reported that the business still suffered a loss of $1.19 billion, slightly narrowing from $1.23 billion in the same period last year.

Changes in stock prices

On Tuesday, local time in the United States, Alphabet's stock price closed up 1.69% at $138.81 per share. However, due to the lower revenue and profit of its cloud computing business than analysts' expectations in its financial reports, concerns were raised about the company's position in a market crucial to its future growth, leading to a sudden 6% drop in the stock. But the company's stock price has risen by 57% so far this year. (Small)