Shares of Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), the parent company of Google, slumped 6% on Wednesday after announcing its fourth-quarter and fiscal year 2023 results.
Despite reporting quarterly revenue of $86.31 billion — a 13% increase from the same period last year — and earnings per share (EPS) of $1.64, Google’s figures failed to impress Wall Street. Investors were expecting more than a 3% earnings beat and 25% growth in cloud computing revenues.
While Alphabet’s core Google business showed robust performance, problems seem to be brewing beneath the surface. The company recently announced further job cuts on top of major layoffs in its hardware team last year.
Management also failed to update investors about the launch of its long-anticipated Gemini AI model — Google’s response to OpenAI’s ChatGPT. The project had previously been delayed because of its handling of some non-English queries. As Google continues to lag in the AI race against OpenAI, the Gemini delay appears to be another hit for the tech giant. Muted ad revenue growth — the bulk of Google’s revenues — added to the concern.
CEO Sundar Pichai remained optimistic in the press release, stating, “We are pleased with the ongoing strength in Search and the growing contribution from YouTube and Cloud. Each of these is already benefiting from our AI investments and innovation. As we enter the Gemini era, the best is yet to come.”
Investors, however, may need more assurance than optimistic CEO commentary. Alphabet’s cost reengineering and its effects on the workforce, combined with the delay and criticism surrounding the Gemini launch, have triggered fears that the tech giant is getting left behind. Analysts speculate that Google may be spreading out bad news to limit the overall negative impact — a strategy that has so far seen mixed results.
The company is expected to announce its next earnings report on April 23, and investors would be keen to see if the tech giant can manage its expenses more efficiently and launch the Gemini model to bolster its AI portfolio and regain investor confidence.
On the date of publication, Thomas Yeung held long positions in GOOG and GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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