Alphabet Q4 results fall short on wobble in core ad business

© Reuters

By Yasin Ebrahim and Scott Kanowsky 

Investing.com -- Google-parent Alphabet (NASDAQ:GOOGL) reported lower-than-expected earnings and revenue for the fourth quarter as slowing online ad spending weighed on performance, sending shares lower in after hours trading. 

The internet search giant posted earnings of $1.05 per share on revenue of $76.05 billion. That compared with expectations for income of $1.18 a share on revenue of $76.07B.

The miss on the top and bottom lines comes as demand at its core advertising business was dented by advertisers, wary about the broader economic backdrop, reining in expenditures. Advertising revenue fell to $59B in the final three months of 2022 from $61.24B compared to the same period last year.

Against the backdrop of softer spending on advertising, Alphabet has turned to cost-cutting measures, announcing earlier this month that it would axe about 12,000 jobs, or 6% of its global workforce. As a result, the company warned that it would be hit by employee severance and related charges of $1.9B to $2.3B, the bulk of which would be recognized in the first quarter of 2023.

The tech firm also said it would incur a $500M expense in the current quarter linked to the exit costs from trimming down its global office space.

"We have significant work underway to improve all aspects of our cost structure, in support of our investments in our highest growth priorities to deliver long-term, profitable growth," Alphabet said in a statement.

In a note, analysts at Evercore ISI maintained their "outperform" rating of the stock, but called the quarterly results "relatively weak" and consistent with earnings from peers like Facebook-owner Meta Platforms Inc (NASDAQ:META), Amazon.com Inc (NASDAQ:AMZN) and Microsoft Corporation (NASDAQ:MSFT).

"Demand is softening, and none of these companies are immune," the Evercore analysts said.