SAN FRANCISCO (AP) — Google’s corporate parent returned to double-digit revenue growth during last year’s final quarter, signaling the internet powerhouse has regained its footing even as it grapples with regulatory and competitive threats to its digital empire.

Alphabet Inc. reported on Tuesday that their revenue has been steadily increasing for the third quarter in a row. This growth has been primarily driven by Google’s dominant presence in the search and online advertising market. This recovery comes after a significant decline in ad revenue during the pandemic, which is unusual considering Google’s consistent growth over the past two decades.

Despite strong growth in other areas like cloud computing and YouTube subscriptions, Google’s ad sales did not keep pace. This led to concerns about the economy and Alphabet’s stock dropping by 7% in after-hours trading, despite exceeding analyst expectations in the fourth quarter.

According to analyst Thomas Monteiro from Investing.com, the lower than expected advertising revenue for Alphabet indicates that companies around the world are hesitant about potential interest rate cuts by global central banks. As a result, they are holding onto their funds and waiting for further indications before making any major financial decisions.

Additionally, Google is facing legal challenges regarding its search engine and advertising platform. Regulators have accused the company of using aggressive tactics that hinder innovation and limit competition. One of these cases, filed by the U.S. Department of Justice, went to trial last fall and is currently in the closing arguments phase, with a decision expected in May. In another antitrust trial, Google suffered a loss that may impact the commissions it receives from its Play Store for Android apps.

In the meantime, Microsoft’s long-standing competitor has been gaining ground in the field of artificial intelligence, propelling the software company, which has been around for almost half a century, to become the most valuable in the world. In contrast, Google has been rushing to release its own versions of this transformative technology. Google has reiterated its intentions to launch even more advanced AI-based services with its Gemini project.

Currently, Google is doing well. In the months of October to December, Alphabet’s earnings increased by 13% compared to the previous year, reaching $86.31 billion. This is the first time Alphabet has experienced double-digit revenue growth since the April-June 2022 period, which was at the end of the pandemic. Google’s ad sales for the fourth quarter increased by 11% compared to the previous year, although there was a decline in the marketing network outside of its search engine.

In its latest quarter, Alphabet generated a profit of $20.69 billion, equivalent to $1.64 per share. This marks a 52% rise compared to the previous year. Despite incurring a $1.2 billion expense for over 1,000 job cuts made this year and downsizing office space as employees shift to remote work, the company still saw strong growth.

“We remain committed to our work to durably re-engineer our cost base as we invest to support our growth opportunities,” said Ruth Porat, Alphabet’s chief investment officer. During a conference call, Porat said Alphabet anticipates doling out $700 million to cover the severance payments to all the employees who lose their jobs from January through March.

At the end of December, Alphabet had approximately 182,500 employees, which is only slightly higher than the number at the end of September. This is a significant decrease from the end of 2022, when Alphabet had over 190,000 employees.

Despite investors’ ongoing dissatisfaction with the fourth-quarter results, Monteiro forecasts that Alphabet will need to continue improving margins, potentially through further layoffs.

Source: wral.com