Alphabet Earnings Release FY23 Q3 [pdf]
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Despite people thinking it was heading for a decline due to Bing, ChatGPT, AI ect. It just posted another quarter with all-time high revenue and this year will be its best year ever.
All sectors are growing and profit, minus other bets.
120B in cash.
25 years of growth without a single year of revenue decline is crazy at 300B yearly revenue.
Blackberry posted their best quarter in _2011_.
Companies that are dead men walking frequently post record-breaking revenue long after someone else has drank their milkshake.
Google still hold a dominate position in Search with ~85% of the market share. The same market share they had for the past decade. No one is taking the market from them.
Their Ads business has more competition that every before, yet it still a growing business. The only company that has taken significant share from that has been Meta and that has slowed significantly for the past 3-4 years now.
So who is going to destroy Google's business like the iPhone did to BlackBerry?
You can't build a significant Ad business overnight and Ads aren't going anywhere.
Google has more 1 billion users application than any other company in the world most of them are contain Ad space for them to sell.
The only threat to Google is Meta and again Meta hasn't been a threat for the past 3-4 years.
We are all paying into Google coffers a tiny bit.
Maybe it's not a zero-sum game, but it's not an unlimited-sum game either. Google is doing this at the expense of the general public, through hundreds of mini-dark patterns designed to extract data and sell it back to us, at a markup (in dollars or attention).
The business may be impressive from the point of big numbers, but that's all it is. It stopped being impressive after the search quality has gone downhill and none of the other products panned out.
How else do you sell a limited resource that more than 1 person wants?
On the other side of that bidding war is a publisher with an ad spot to sell. Sure Google takes a cut of that sale, but in every auction there is always a commission given to the auctioneer.
No one is complaining about Sotheby's making a profit when they sell the latest Banksy painting for squillions.
That is a revenue increase of only about 4% even though they have added way more than 4% of ads in the last year! So maybe on paper it still looks great, but advertisers are definitely spending less.
EDIT: Might also explain why they are obsessed with adblockers now on YouTube. Numbers have to go up in the next quarter again. I wonder whether accepting that the party is over might be a better long term strategy.
There was definitely a relative slowdown as the world opened up after the pandemic. The comparisons from now on will be more relevant to the long-term growth prospects.
In the document they mention this:
In January 2023, we completed an assessment of the useful lives of our servers and network equipment and adjusted the estimated useful life of our servers from four years to six years and the estimated useful life of certain network equipment from five years to six years. This change in accounting estimate was effective beginning in fiscal year 2023, and the effect was a reduction in depreciation expense of $977 million and $2.9 billion and an increase in net income of $761 million and $2.3 billion, or $0.06 and $0.18 per basic and $0.06 and $0.18 per diluted share for the three and nine months ended September 30, 2023, respectively.
I bet there are lots of places that parallelisation makes more computers within the ballpark of acceptable performance perfectly cromulent to keep around.
Heck, my 2015 mac is a perfectly serviceable media player when I watch sport.
When we were in a low/zero interest rate environment - there was a growth at all costs mentality among investors (and therefore management). Since investors didn't give any bonus points if a company was able to operate profitably - might as well depreciate to the max allowable by accounting law and not show a profit. In fact - not showing a profit was actually seen a positive features/badge of honor for a stock.
Now that interest rates have gone up, investors care about ability to generate current cashflow/net income and are prioritizing rational PE ratios - depreciating expenses over a longer time horizon (closer to reality) makes sense.
- server/cloud computing is largely all about performance per watt
- the latest couple gens intel seem to be struggling to innovate and are just getting better benchmarks by cranking up the power consumption. even AMD's latest release is along the lines of "x% faster per core, XX% more power draw".
So I wonder if this is percolating out into the server/cloud space where people are just watching the chipmakers trade off efficiency for benchmarks and are unimpressed.
Fifteen years ago, you could assume that you would have 50% larger hard drives and significantly more FLOPS/watt with each year's new systems. Today, that trend has almost entirely stalled.
In short: servers used to have short life-cycles not because they no longer worked, but because they had so much higher operating expenses (electricity, datacenter floor-space) than newer models. That trend no longer holds; the more relevant question today is "how long will the servers work".
Isn't it because it's precisely the opposite? Moore's law stopped a while ago, at least that's what a lot of people think.
So much of the new tech now seems to be around GPU's and LLM's, but that doesn't affect the Google Search or YouTube or Docs servers. So they just keep humming along as usual, with a totally different set of new-fancy-tech servers spun up for the new fancy stuff.
Also "data center electrical power / compute" (which reflects both cooling and server power supply cost) has held relatively steady for a while which makes it easier to do that.
Edit: That’s only a small part indeed.
Employee severance and related charges: $86 million
Real estate exit charges: $16 million
Accelerated rent and accelerated depreciation: $207 million
Looks like Google Brain/Deepmind accounts for most of the remaining $1B-plus.
> As announced on April 20, 2023, we brought together part of Google Research (the Brain team) and DeepMind to significantly accelerate our progress in artificial intelligence (AI). The group, called Google DeepMind, is reported within Alphabet's unallocated corporate costs prospectively beginning in the second quarter of 2023. Previously, the Brain team was included within Google Services.
https://finance.yahoo.com/news/alphabet-q3-earnings-12311976...
If you're trying to pass/catch up to second place (MSFT), growing 6-7 percent less than second place doesn't help.