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Alphabet posts higher revenues but lower profits in 2022

Alphabet Inc, the parent company of Google, has released its financial results for the 2022 year.

Its fourth quarter 2022 consolidated revenues were US$76 billion, ((AU$107 billion) up 1% year-on-year, or up 7% in constant currency, and US$283 billion (AU$400 billion) for the full year 2022, up 10%, or up 14% in constant currency.

Net income for the group was US$59.97 billion for 2022, down from net income of $76 billion in 2021, while for the fourth quarter it was US$13.6 billion, down from US$20.7 billion in the corresponding period 2021. Third quarter 2022 earnings were $69.1 billion (AU$108 billion).

 

[click to enlarge]: Alphabet 2022 financial report

Last month Google announced a reduction of its workforce of approximately 12,000 roles.

“We expect to incur employee severance and related charges of US$1.9 billion to US$2.3 billion, the majority of which will be recognised in the first quarter of 2023,” the financial statement read.

As of 31 December 2022 Google had 190,234 employees globally.

Locally, it is understood that those cuts are yet to be made and could see 6 per cent of Google’s 2,500 strong Australian workforce let go.

“In addition, we are taking actions to optimise our global office space. As a result we expect to incur exit costs relating to office space reductions of approximately US$0.5 billion in the first quarter of 2023. We may incur additional charges in the future as we further evaluate our real estate needs,” the statement added in relation to the ongoing global shift in work behaviours.

The Asia Pacific region accounted for US$47 billion of the company’s revenue in 2022, representing a 10 per cent increase on the previous year.

[click to enlarge]: Alphabet financial results Q4 2022

The United States Department of Justice recently filed a lawsuit for the second time against Alphabet, seeking to break up its digital advertising business. This marks a significantly more serious challenge for the US-based company, after it was first hit with an antitrust lawsuit in 2020.

In the 2022 December quarter Google’s advertising revenue was US$59 billion, down from US$61 billion in the corresponding period 2021. It still accounts for the lion’s share of revenues, although Google Cloud did increase from US$5.5 billion in Q4 2021 to US$7.3 billion in Q4 2022.

Sundar Pichai, CEO of Alphabet and Google, said: “Our long-term investments in deep computer science make us extremely well-positioned as AI reaches an inflection point, and I’m excited by the AI-driven leaps we’re about to unveil in Search and beyond. 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.”

In January 2023,Google completed an assessment of its servers and network equipment, resulting in a change in the estimated useful life of its servers and certain network equipment to six years, which we expect to result in a reduction of depreciation of approximately US$3.4 billion for the full fiscal year 2023 for assets in service as of December 31, 2022, recorded primarily in cost of revenues and research and development (R&D) expenses.

From this year Google will update segment reporting relating to certain Alphabet AI activities. DeepMind, previously reported within Other Bets, will be reported as part of Alphabet’s corporate costs, reflecting its increasing collaboration with Google Services, Google Cloud, and Other Bets. Prior periods will be recast to conform to the revised presentation.
It added that “AI is critical to delivering our mission of bringing our breakthrough innovations into the real world”.

Alphabet was trading at US$107.74 today with a market cap of US$1.401 trillion.

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