Alphabet, the parent company of Google, faced a tough crowd of investors after their latest earnings report showed that their Cloud business isn’t meeting expectations. Despite pulling in more money overall, it’s clear that Google Cloud’s struggles are giving investors pause, with stock prices dipping in immediate response.
Google made more money this year, earning $76.69 billion, 11% more than last year. But Google Cloud fell slightly short at $8.41 billion, not reaching the expected $8.64 billion.
This stumble stands out because other companies like Amazon and Microsoft are doing great, making the competition even tougher. For example, Microsoft’s Azure saw its revenue jump by 29%, outshining Google Cloud.
Money Talks in AI, But Is Anyone Listening?
Google hasn’t been shy about putting money into AI, hoping these smart technologies would give them an edge. The company has been showing off its AI projects, like Duet AI and Bard, which are meant to go toe-to-toe with similar services from other companies.
But this heavy focus on AI hasn’t paid off as they hoped. Ruth Porat, the big boss of finances at Alphabet, shared that they’re still waiting to see the big payoff from these investments.
“We see strong engagement with our products and services, and we’re putting money confidently into this area, expecting good things,” Porat said. “We’re happy with how we’re doing operationally, and we’re working hard to manage our costs while going after our top growth plans, especially in AI.”
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Not All Sunshine and Rainbows
Google’s journey this year has been bumpy. They had to let go of many workers – a difficult decision affecting 12,000 people. And just last week, more people lost their jobs in the parts of the company working on self-driving cars and health technology.
The company’s leaders also changed their roles, with Ruth Porat announcing she’ll be switching from her finance-focused role to a new one that deals with investments.
A Silver Lining in Tough Times
Even with these hurdles, Alphabet still had some wins. Their advertising business is making more money, earning $59.65 billion, which is even better than what experts thought they’d make. Plus, YouTube is making more money from ads, pulling in $7.95 billion.
Interestingly, even YouTube’s new feature, ‘Shorts,’ came out swinging with new, smart video editing tools, showing that Alphabet isn’t backing down from its bet on AI.
Investors Not Easily Charmed
Despite some wins, investors weren’t happy. Google’s shares didn’t do well after the earnings news came out, dropping by more than 6%. It seems investors are waiting to see more, especially from the Cloud business, before they celebrate.
Sundar Pichai, the head honcho at Alphabet and Google, remains hopeful, sharing that things are starting to look up. “We’re seeing signs that things are picking up,” he said.
So, while it’s clear that Alphabet is going through a rough patch, they’re not taking it lying down. With heavy investments in technology, particularly AI, they’re betting big on the future. Whether this bet pays off remains to be seen in the quarters to come.
