Search Engine Misfire

Search Engine Misfire

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  • Alphabet Inc. posted fourth-quarter revenue from its core search advertising business that missed analysts' estimates, causing its shares to fall 6.5% in extended trading. While overall sales, excluding partner payouts, reached $72.3 billion, beating projections, revenue in the core search business was $48 billion, slightly below the expected $48.15 billion. The disappointment comes amid broader uncertainty for Google's search engine, facing new competition from generative AI-driven platforms like Microsoft and OpenAI.
  • Despite robust revenue growth and a net income of $1.64 per share, the company faced challenges in its core advertising business. The shift in the market, with rising competition fueled by generative AI, has created uncertainty for Google's advertising revenue, impacting its overall growth trajectory. The focus on AI and diversification beyond the traditional advertising model is evident in Google's efforts, including the release of its powerful language model, Gemini, and the profitability of its Google Cloud unit, which reported an operating profit of $864 million in the last quarter.

Why it matters

While Google Cloud demonstrated notable growth and profitability, Google's Other Bets, including moonshot projects like Waymo and Verily, reported $657 million in revenue with an operating income loss of $863 million. The company continues to invest in AI, with capital expenditures increasing, and it seeks to diversify revenue streams beyond its core advertising business.


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