Alphabet, the parent company of Google and YouTube, released its fourth-quarter 2022 earnings report last week, which fell short of analyst estimates. The report showed a decline in YouTube’s ad revenue, leading to a decrease in overall earnings for the company. Alphabet posted revenue of $76.05 billion, a mere 1% increase, and net income of $13.62 billion, a 34% decrease compared to the fourth quarter of 2021.
YouTube’s ad revenue was $7.96 billion in the fourth quarter, a decrease of 7.8% from the previous year due to reduced ad spending and heightened competition from TikTok. However, CEO Sundar Pichai emphasized the growth of YouTube Shorts, which now averages over 50 billion daily views.
Creators of YouTube Shorts also became eligible for ad revenue sharing as of February 1st, with a 45% split based on their share of total views compared to 55% for the long form of videos under the YouTube Partner Program.
Operating expenses rose 10% to $22.50 billion, driven by growth in headcount, charges for legal matters, and reduced ad spending. The company also reported a loss of $1.49 billion on equity securities during the quarter. The Other Bets segment, which includes Waymo and health-tech projects, reported revenue of $226 million, an increase from $181 million the previous year, but also posted a loss of $1.63 billion, up from $1.45 billion in the same period of the previous year.
“Beyond our advertising business, we have strong momentum in Cloud, YouTube subscriptions, and hardware. However, our revenues this quarter were impacted by pullbacks in advertiser spend and the impact of foreign exchange,” said Pichai.
Google Cloud’s revenue for Q4 was reported at $7.32 billion, which although higher by 32% compared to the previous year, was lower than what analysts had forecasted. The company managed to reduce its losses significantly from $890 million in the previous year to $480 million in Q4.
The Search and Other segments of Google brought in a revenue of $42.60 billion, which was a 2% decrease compared to the previous year. The executives reported a further decline in advertiser spending in Q4 compared to Q3.
Google’s Other Revenues segment, comprising hardware and non-advertising YouTube revenue, reported a revenue of $8.8 billion, which was an 8% increase compared to the previous year.
Operating expenses increased by 10% to $22.50 billion, due to factors such as headcount growth, charges for legal matters, and lower ad spending. The company also incurred a loss of $1.49 billion from equity securities during the quarter.
Alphabet’s Other Bets segment, which includes Waymo’s self-driving car unit and various health-tech and venture projects, reported a revenue of $226 million, an increase from $181 million in the previous year. The segment incurred a loss of $1.63 billion in Q4, which was higher compared to the loss of $1.45 billion in the previous year.
In January, Alphabet laid off some 12,000 employees. CEO Sundar Pichai attributed the layoffs to the company’s decision to increase staffing during the pandemic to meet demand. The results of the fourth quarter of 2022 are the first since the layoffs took place.