Google cloud growth slows as Alphabet net income plunges
Even
though
Google
Cloud
revenue
growth
showed
signs
of
slowing,
it
nevertheless
provided
something
of
a
bright
spot
as
parent
company
Alphabet
—
hit
hard
by
the
tightening
of
customer
budgets
—
posted
a
year-over-year
decline
in
net
income
for
its
2022
Even
though
Google
Cloud
revenue
growth
showed
signs
of
slowing,
it
nevertheless
provided
something
of
a
bright
spot
as
parent
company
Alphabet
—
hit
hard
by
the
tightening
of
customer
budgets
—
posted
a
year-over-year
decline
in
net
income
for
its
2022
fourth
quarter.
Fourth-quarter
gross
revenue
for
Alphabet
was
$76.05
billion,
up
just
1%
from
$75.3
billion
a
year
ago.
Net
income
was
$13.6
billion,
down
34%
from
$20.6
billion
in
the
fourth
quarter
of
2021.
Even
though
revenue
grew
slightly,
rising
expenses
—
mainly
for
research
and
development
—
helped
cause
the
steep
drop
in
net
income.
One
of
the
best-performing
business
segments
for
the
quarter
was
Google
Cloud,
where
revenue
was
up
by
32%
year
on
year,
growing
to
$7.32
billion.
Google
Cloud
cuts
losses
Google
Cloud
was
one
business
unit
that
managed
to
keep
costs
down,
which
helped
cut
losses.
The
business
unit
operated
at
a
$480
million
loss
in
the
most
recent
quarter,
compared
to
the
$890
million
it
lost
in
the
year-earlier
period.
Though
cloud
computing
provides
revenue
opportunities
for
Google
and
competitors
including
Microsoft
and
AWS,
costs
related
to
expanding
and
running
infrastructure
are
high.
It
wasn’t
all
good
news
for
the
cloud
business,
though.
Even
though
cloud
revenue
was
up,
growth
was
slower
than
the
38%
jump
in
revenue
the
company
reported
for
the
third
quarter.
Meanwhile,
Google’s
total
advertising
sales
fell
to
$59
billion,
down
3.6%
from
the
$61.2
billion
the
company
posted
a
year
earlier.
In
particular,
a
slowdown
on
YouTube
advertising
spend,
caused
revenue
to
fall
to
$7.96
billion,
an
8%
decrease
from
the
$8.63
billion
it
generated
in
the
prior-year
period.
Going
forward,
Google
is
focused
on
growing
its
advertising
revenue
through
AI-driven
innovation,
Chief
Business
Officer
Philipp
Schindler
said
on
a
call
with
analysts
after
the
results
were
posted.
“Already,
breakthroughs
in
everything
from
natural
language
understanding
to
generative
AI
are
fueling
our
ability
to
deliver
results
that
drive
meaningful
performance
for
advertisers
and
are
useful
to
users,”
he
said.
Google
plans
to
roll
AI
into
more
products
CEO
Sundar
Pichai
told
analysts
on
the
call
that
in
the
coming
months,
Google
will
start
rolling
out
AI
built
on
its
large
language
models
into
its
products,
starting
with
LaMDA
(Language
Model
for
Dialogue
Applications).
He
said
that
both
LaMDA
and
PaLM
(Pathways
Language
Model)
would
be
made
available
so
that
“people
can
engage
directly
with
them,”
which
will
help
the
company
“continue
to
get
feedback,
test
and
safely
improve
them.”
LaMDA
currently
works
with
137
billion
parameters,
while
PaLM
uses
540
billion.
In
comparison,
GPT-3.5
the
large
language
model
developed
by
Microsoft-backed
OpenAI,
and
the
basis
for
ChatGPT,
uses
175
billion
parameters.
In
addition
to
growth
across
Cloud,
Google’s
Other
Revenues
segment
—
which
includes
hardware
and
nonadvertising
YouTube
revenue
—
also
posted
a
revenue
increase,
totaling
$8.8
billion,
up
8%
from
the
year
prior.
Additionally,
revenue
in
Alphabet’s
Other
Bets,
a
business
segment
that
comprises
projects
such
as
health
technology
and
driverless
cars,
rose
to
$226
million,
up
from
$181
million
in
the
fourth
quarter
of
2021.
On
the
analyst
call,
CFO
Ruth
Porat
announced
that
starting
in
the
first
quarter
of
2023,
the
AI
subsidiary
DeepMind
would
be
reported
as
part
of
Alphabet’s
corporate
costs,
instead
of
Other
Bets,
where
it
currently
sits.
Porat
said
this
was
to
“reflect
the
increasing
DeepMind
collaboration
with
Google
Services,
Google
Cloud
and
Other
Bets.”
Alphabet’s
results
come
mere
weeks
after
the
company
announced
it
would
be
laying
off
around
12,000
employees.
As
a
result
of
those
job
cuts,
the
company
expects
to
incur
employee
severance
and
related
charges
of
$1.9
billion
to
$2.3
billion,
the
majority
of
which
will
be
recognized
in
the
first
quarter
of
2023.
Additionally,
Alphabet
expects
to
incur
a
further
$500
million
of
costs
related
to
exiting
leases
early.
Despite
the
dramatic
reduction
in
workforce
size,
Porat
said
the
company
will
“continue
hiring
in
priority
areas
with
a
particular
focus
on
top
engineering
and
technical
talent
as
well
as
on
the
global
footprint
of
our
talent.”
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