Google missed estimates in Q4: ‘it’s still the fabric of the internet’

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on Feb 3, 2023
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  • Alphabet Inc reports weaker-than-expected results for its fiscal Q4.
  • Gene Munster discussed its earnings report on CNBC's "Fast Money".
  • Wall Street still has a consensus "buy" rating on the Google stock.

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Alphabet Inc (NASDAQ: GOOGL), on Friday, seems to be recovering its after-hours losses from last night that materialised after the search giant came in shy of Street estimates in its fiscal fourth quarter.

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Analyst reacts to Google’s quarterly results

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Excluding traffic-acquisition costs (TAC), though, the tech behemoth brought in $63.12 billion revenue in its recent quarter – up 2.0% year-on-year but slightly missing the $63.2 billion consensus.

The multinational blamed currency headwinds and advertising slowdown for the weakness in Q4. Discussing its quarterly results on CNBC’s “Fast Money”, Deepwater Asset Management’s Gene Munster said:

I think the numbers for the March quarter need to come down. [But] ultimately, I think this company is still the fabric of the internet. I think they’re still going to do great long term.

Munster is constructive on Google stock

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At $7.96 billion, YouTube ad revenue also came in below both the last year’s figure and the experts’ forecast, as per the earnings press release.

Google Cloud generated $7.32 billion in revenue – up 32% versus last year but still $0.11 million shy of estimates. Munster also said:

I think this was a dodged bullet. It could have been worse. Optimistic part is that growth rates will improve. After investors process these results, they’ll look forward and be more optimistic about what they’ll grow in back half of the year.

Despite a weak quarter, Wall Street continues to recommend buying Google stock and sees upside in it to $125 on average.

Google to launch a ChatGPT rival

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According to Alphabet Inc, it will soon launch a ChatGPT rival as a complement to its search engine, which, as per Gene Munster, will be another catalyst for the Google stock.

That’s a big deal, because if they can integrate a ChatGPT version into the power of their search, that’s something ChatGPT doesn’t do today. I think it’ll be a lever for investors to get more excited about Google in the back half of the year.

Google is ramping up its efforts in launching a chatbot after rival Microsoft announced a multi-billion-dollar investment in OpenAI – the company behind ChatGPT (read more).

Key takeaways from Alphabet’s Q4 earnings report

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  • Earned $13.62 billion versus the year-ago $20.64 billion
  • Per-share earnings also tanked from $1.53 to $1.05
  • Revenue went up 1.0% year-on-year to $76.05 billion
  • Consensus was $1.18 a share on $76.2 billion revenue
  • Ad sales slipped a more than expected 3.5% to $59 billion

Alphabet Inc is committed to cutting costs as well. Last month, it revealed plans of cutting about 12,000 employees worldwide that Invezz reported HERE. Google stock is currently down 30% versus its record high.

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