Hacker News Reader

Comment by etamponi | Hacker News Reader

Okay so why is GOOG -4% in after hours this time? :)

In the 18 years i've been at GOOG, what direction the stock moves post-earnings is always random, and then talking heads try to post-facto rationalize it.

I've seen Google blow away earnings and all expectations and be down 10%, and completely miss expectations and pop up 5%.

Everyone has an explanation for this but a while ago there was this online game someone made which would give you some metric about some public stock and then you had to guess to buy / sell. It's not that straightforward.

Here, GOOG was $144.99 on Jan 18 and $144.50 on Jan 30 and this is supposed to be some dramatic shift in things? Bullshit.

Without being an expert in these matters it could be that while the earnings were good they may have already been "priced in"[0], so if the earnings weren't quite as high as expected or particular areas of revenue have contracted unexpectedly[1] then it could cause the price to move downwards. It could also be a result of larger market fluctuations, as a lot of larger F100 companies have also gone down by a similar amount today[2]. Any one of these factors or a combination of them together is likely the cause of the stock price movement seen today.

[0] https://www.kotaksecurities.com/articles/it-is-priced-in-wha...

[1] https://finance.yahoo.com/news/alphabet-misses-expectations-...

[2] https://www.investors.com/market-trend/stock-market-today/do...

I don’t know if it’s the actual reason, but they missed ad revenue expectations according to Yahoo.

https://finance.yahoo.com/news/stock-market-today-nasdaq-fal...

Hm there it says

Revenue, excluding traffic acquisition costs: $72.32 billion vs. $70.97 billion expected ($63.12 billion in Q4 2022)

Adjusted earnings per share: $1.64 vs. $1.59 expected ($1.05 in Q4 2022)

Cloud revenue: $9.19 billion vs. $8.95 billion expected ($7.32 billion in Q4 2022)

Ad revenue: $65.5 billion vs. $65.8 billion expected ($59.04 billion in Q4 2022)

I hope that 0.3 is not the reason for that slip haha

Google missing on ad revenue is like Apple missing on iPhone revenue. It's even worse for Google because it's a larger part of their business. Is the miss a blip or a signal of a slowing ad market or are LLMs eating into their business? Hard to know, but that's the concern.

LLM is not doing anything given that Bing's growth since adding chat-gpt has been negligible.

You have solid numbers behind your claim?

By the way people are asking chatgpt or copilot what they used to Google. Not everything but a lot. I most certainly do and I think I'm not alone.

Isn't Bing Google biggest search competition? Is the general public using chat as a general search engine to replace the more traditional search engine or is it just us tech people. I can tell you I know of no one doing this outside of tech coworkers and even then just use it for programming related tasks to a very limited way.

https://www.bloomberg.com/news/articles/2024-01-18/microsoft...

Google's biggest competition is whatever makes people use their search less.

I know for sure some people who use chatgpt in place of Google search like students or people needing translations.

We beat expectations across the board a couple quarters ago except in cloud. Stock dipped the next day. I’m unconvinced this dip is a meaningful signal into the trajectory of Google or is based on any reasonable concern.

Ad revenue: $65.5 billion vs. $65.8 billion expected ($59.04 billion in Q4 2022)

Right, they got $300 million less than expected.

Which means they only got 99.544072948% of what the analysts expected.

That means they missed analyst expectations by 0.455927052%.

Not for total Revenue. Not for EPS. Not for net income. Not for diluted EPS. For the one category, Ad Revenue.

Resulting in a 6% after-market drop.

0.455927052% miss. 6% drop.

I think it's entirely possible that people focus too much on short term metrics and not enough on long-term growth.

Google revenues come from ~90% ads. It's an ad company.

The company gives guidance, so the estimates are not pulled out of thin air. Google should know their ad business very well at this point.

People selling after an ad miss is medium/long term thinking. They could be wrong, but was the miss caused by a wider economic slowdown (see UPS earnings) or was it Google specific? Either way, it could be sign of Google slowing down or the economy as whole.

> Google revenues come from ~90% ads.

That's not true, and hasn't been for a decade. For this earnings release, the proportion of revenue from ads was 76%.

> The company gives guidance

No, they don't. As far as I know they've literally never given guidance.

Ok, I divided the search revenue into the revenue number above, but it’s missing TAC. 76% is still the vast majority of revenue.

TAC shouldn't be part of that computation. It's an expense, not revenue. (Yes, it's confusing that it's in the same table as the revenue numbers, but so is the headcount and you wouldn't try to work it into the equation somehow.)

Also, if you only consider the search revenue you'll err in the opposite direction. It's 55% of their revenue, so pretty soon not even a normal majority. You should look at the "Google Advertising" line.

Thank you!

What do you think the covering analysts talk to google executives about? The weather?

From your misplaced sarcasm, it seems that you might not know what "guidance" means in this context. It's the company predicting what their financials will be in the future, such as "our revenue will be in the range $X-$Y in the next quarter". There's a lot of space for discussion between those kinds of predictions and the weather. For example, they could discuss what happened in the previous quarter. They could discuss future plans, without making any exact claims on the impact of those plans.

If you truly believe Google releases guidance, how about you just find a quote for what that supposed guidance was for Q4? You won't find it, because Google does not release guidance. The GP just made it up, just like they made up the numbers.

Yet when we beat expectations in ads but barely miss in cloud the stock tanks as well. There’s no reasonable explanation I’ve heard for our stock behavior after our earnings beat expectations.

Missing 0.5% of your core business revenue is a bad sign for long term.

Core business revenue went strongly up, it just went up slightly less than analysts hoped.

There could be other factors in play like the recent volatility in Netflix within the same sector, as well as the upcoming FOMC meeting tomorrow causing increased fear. Markets aren't always as accurate and efficient as some believe, and stock prices always become more volatile around earnings.

All those other factors would have been priced in at the end of the day. The only new information since then would have been the earnings release. If the absolute numbers are better than expected, then maybe it's the relative numbers (as compared to Microsoft who also released earnings) that are worse than expected?

Completely true, it would be a combination of both. Clearly it didn't meet a lot of expectations indicated by the selloff, but selling could also be aggravated by a sell day in the Nasdaq/XLC and high impact economic events on the horizon. This is all conjecture from me, I am by no means a market expert, just offering a way to rationalize the above comment on how a good/"not that bad" earnings report can still result in a stock having a large selloff.

Also keep in mind that the "expected" are not the actual expected, but rather "publicly expected numbers that are freely given out and therefore useless". Investment firms have private expected numbers that are far more accurate, the publicly given out ones are designed to manipulate retail investors.

Almost definitely the case that people are disappointed in the ad revenue.

GCP is growing to be a meaningful part of Google's revenue, but the actual profit at Google is almost entirely ad revenue. If that is a miss, and on the horizon we see AI disrupting search and increased competition in digital video advertising then what does that mean for the future of Google?

I think that's probably being a bit pessimistic, but that's probably the argument.

Considering the massive amount of ads on YouTube now there seems to be something amiss. Are the ad rates going down?

After hours trading is also usually more volatile than regular hours, check in the morning and see where $GOOG actually opens.

The market can remain irrational something something.

Besides, it’s a good opportunity. If it’s down, the stocks are on sale. I still regret not buying Meta when the markets were crashing last time.

For a distributed decision-making method like the market, there is no single reason.

Every buyer and seller has their own price and own reason for it.

Typically, that happens when forward guidance given on the call does not meet expected forward guidance.

Two things:

1. "sell on the news"

2. results vs "expectations"[1]

"expectations" is a weird Wall St concept where some small number of people who don't necessarily know much get to invent a set of numbers for the company results in the future. Then a bunch of other people who know even less believe/pretend that those expectations mean something, and will buy/sell the stock accordingly when the actual results are revealed. Yes Kabuki Theater. Actually it's about as bogus as software project planning/management, so perhaps all fields have similar made up nonsense. Hopefully not the people designing bridges. Or airplanes. Oh wait...

The absolute performance isn't very important for the stock price. What matters way more is the performance vis-a-vis market expectations. So in this case, the market was expecting something better (or there was some other guidance in the report that spooked investors).

Stock prices are always pricing in the future, not the current.

I think this happens every quarter.

Because expectations were higher?

"buy the rumors, sell the news" combined with "priced for perfection"

Reply on news.ycombinator.com