Google parent company Alphabet beat market expectations with a net profit of $15 billion in the first quarter of 2023, the company said on Tuesday in a sign that the search engine behemoth is regaining its feet.
The tech titan has found itself under pressure from a general slowdown in ad spending, over-hiring during the Covid-era boom and a bigger challenge by Microsoft on artificial intelligence.
Its quarterly revenue came in at nearly $70 billion, a billion better than analysts expected, and in the same three-month period the company said it would lay off 12,000 employees, or six percent of its workforce.
In its results, Google announced a $2 billion charge for the expected costs for the dismissals.
Microsoft’s results for the first three months of the year also pleased investors on Tuesday, as sales of its industry-leading business cloud products grew.
The Bill Gates-founded company reported a profit of $18.3 billion on revenue of $52.9 billion as cloud and AI were more than offset by a decline in revenue from licensing Windows software to computer makers as sales in that market were affected. Had happened.
Much of the market’s focus was on Google, which became a concern when the Microsoft-backed ChatGPT was released and quickly went viral late last year. The Windows maker has added the technology to its Bing search engine and Office software.
The search giant has since rolled out Bard, its version of language-based AI, according to media reports, but the release was seen as clumsy and has so far disappointed observers and company insiders.
The arms race over AI is expected to last several years and could prove costly for tech giants, with companies worried they could quickly lose ground to rivals.
To prepare itself for the AI wars, Google has reorganized its AI division, putting the independently run Deep Mind subsidiary inside the company into a division called Google Brain.
– ‘Serious challenges’ –
The host of challenges sent Google CEO Sundar Pichai on a rare US media tour in recent weeks to assure that the company remains an industry leader on everything from search to maps to AI pioneering.
Despite the headwinds, Pichai received a total compensation package of more than $225 million in 2022, according to a regulatory filing posted last week.
In a sign that the troubles are still far from over, Google-owned YouTube’s advertising revenue fell for the third quarter in a row, falling 2.6 percent year on year to $6.7 billion.
The struggles at YouTube came in the same quarter as its longtime CEO Susan Wojcicki stepped down after nine years, to be replaced by longtime executive Neil Mohan.
“Google beat both revenue and earnings expectations this quarter, but the reasons for investor optimism are modest,” said Max Willens, senior analyst at Insider Intelligence.
“More importantly, Google’s advertising business is at risk. YouTube’s revenue decline again, and search and other revenue growth of less than 2 percent, reflects the reality that Google’s core business is facing the most serious challenges it has faced in some time.”
Despite the deep-rooted problems, Alphabet’s share price has recovered well from losses seen before the January layoff announcements and rose more than 4 percent to $108.4 in after-hours trading on Tuesday.
It was still close to the $150 seen in 2021, when advertising revenue was on the rise.
Microsoft continues to press on with its AI revolution, recently announcing that it will be implementing the powers behind ChatGPT into its iconic Excel, Word and Outlook programs.
The Redmond, Washington giant is rapidly adopting language-based AI, showing less caution than its rivals despite early problems, such as chatbots giving jarring responses or blatantly incorrect information.
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(This story has not been edited by News18 staff and is published from a syndicated news agency feed)