Alphabet (GOOGL) Q1 earnings report 2023

Alphabet shares rose more than 4% in extended trading on Tuesday after Google’s parent reported first-quarter results that exceeded analysts’ estimates.

The company also said its board authorized a $70 billion share buyback.

Here are the key numbers:

• Earnings: $1.17 per share vs. $1.07 per share expected, according to Refinitiv.
• Revenue: $69.79 billion vs. $68.9 billion expected, according to Refinitiv.

The beat on the top and bottom lines breaks a string of four straight quarters in which the company missed consensus estimates.

• YouTube advertising revenue: $6.69 billion vs. $6.6 billion, according to StreetAccount.
• Google Cloud revenue: $7.45 billion vs. $7.49 billion, according to StreetAccount.
• Traffic acquisition costs (TAC): $11.72 billion vs. $11.78 billion, according to StreetAccount.

Alphabet’s revenue rose 3% from $68 billion a year earlier, according to the earnings report. The company is mired in a multi-quarter stretch of low single-digit revenue growth after almost two decades of consistent and rapid expansion. With fears of a recession building since last year, advertisers have been reeling in online marketing budgets, wreaking havoc on Google, Facebook and others.

Ad revenue beat analyst expectations, but fell from the year prior to $54.55 billion. YouTube ad revenue stayed in line with analyst expectations, also declining from a year ago. Google’s Search and Other revenue came in at $40.36 billion, up slightly from $39.62 billion a year ago.

In addition to the overall pullback in ad spending, YouTube is also facing heightened competition from TikTok in short-form videos. YouTube shorts now has 50 billion daily views, CEO Sundar Pichai said in a call with investors Thursday.

To grapple with the recent advertising weakness, Google has had to make its most extreme cuts in its company history, including laying off 12,000 employees — about 6% of its workforce in January. This month, CFO Ruth Porat announced “multi-year” cuts to things like real estate, employee services and equipment.

Alphabet reported $2.6 billion in charges related to the layoffs and office space reduction during the quarter.

The company said net income dropped to $15.05 billion from $16.44 billion a year earlier.

Google is finally generating a profit in its cloud-computing business, which competes with Amazon and Microsoft. The unit recorded operating income of $191 million in the quarter, following a $706 million loss a year ago.

Google is feeling pressure from the popularity of AI-based chatbot ChatGPT, launched late last year by Microsoft-backed OpenAI. The company quickly launched its own AI chatbot called Bard during the quarter.

Revenue in Other Bets, which includes Google’s life sciences unit Verily and self-driving car company Waymo came in at $288 million, down from $440 million a year ago. The company previously said starting in the first quarter, artificial intelligence subsidiary DeepMind will no longer be reported in Other Bets, but will be reported as part of Alphabet’s corporate costs.

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