Google Q4 Earnings Review

I have been covering and holding Alphabet for the past couple of years, but my view on the long-term has recently changed. At the end of this review, I’ll go over what I’ve been thinking and what I’ll be doing with respect to this position.

Google reported results for the fourth quarter of 2023 on January 30^th. The company generated revenues of 86.31bn, growing 13% on a yearly basis and accelerating from last Q’s 11%. This made Alphabet finalize 2023 with sales of 307.3bn, representing an increase of 9%.

Source: Self-made with data from Alphabet’s quarterly press releases

Alphabet posted record gross profit for the quarter, which was at 48.97bn. Its respective margin stood at 56.5%, expanding 300bps YoY. Operating income was 23.69bn, implying a margin of 27.5% and increasing by 360bps. Lastly, Google operated at a 24% net profit margin, compared to a 17.9% last year, producing 20.68bn in net income.

Source: Self-made with data from Alphabet’s quarterly press releases

Management made evident their intentions to increase the efficiency with which the company operates. In consequence, they reduced Alphabet’s headcount at the beginning of 2023 and committed to make better use of their real estate footprint and resources.  

Headcount stayed flat on a quarterly basis. As a result of the reduction, the company recorded 2.1bn in employee severance and related charges during 2023. At the same time, office exit charges amounted to 1.2bn during the quarter. Lastly, 62M and 269M were incurred due to accelerated rent and accelerated depreciation.

Source: Self-made with data from Alphabet’s quarterly press releases

Turning into the cash flow statement, Alphabet brought in 18.91bn in cash from operating activities, down from 23.6bn in the comparable quarter. The largest swing was tax-wise. The company had a non-cash expenditure of income taxes of 1.4bn last year, whereas in this part quarter income taxes amounted to a 9.8bn cash outflow. On the other hand, capital expenditures were 11bn. During the full fiscal year, cash from operating activities was 101bn, up from 91.5bn in 2022, while CapEx equated to 32.2bn, similar to 2022’s 31.5bn.

Source: Self-made with data from Alphabet’s quarterly press releases

After covering Alphabet from a broad level, I will now delve into the company’s business units as well as management commentary and outlook. To finalize the review, I’ll share my take on the quarter. I’ll make use of the last space to expand on what I’ve been thinking about Google and what I’ll be doing portfolio-wise.