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.
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.
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.
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.
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.
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.
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