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Alphabet stock announced Q1 results. Google’s Internet dominance under threat from AI. A realistic future for YouTube.

The Alphabet stock, represents a complex business

Google (Alphabet) announced Q1-2023 results. The results were anticipated to see the progress in the results of the various business divisions. Alphabet, as a group is an internet, media powerhouse, via Google. Google contributes 99% of Alphabet’s revenue. Internet advertising accounts for more than 85%. Other sources of revenue for Google include app and content sales on Google Play and YouTube. On top of this is cloud service fees and other licensing money.

alphabet stock

There are threats out there addressed on the Earnings Call. Alphabet covered two main topics impacting the stock. First advancements in Artificial Intelligence and opportunities in Internet Search. The second topic was Google’s efforts to focus as a company on the various areas. The two main aspects are Cloud and their key business being YouTube.

To understand what an Earnings Call, click HERE.

First Quarter 2023 results, the Alphabet stock price?

Alphabet stock announced, First Quarter 2023 results. Total revenue for the quarter was $69.8 billion, + 3% or +6% in constant currency. One big drive was the share buyback of $70 billion. Internet search remained the largest revenue driver. YOY, expenses and profitability are influenced by three factors:
  1. In total, there were $2.6 billion in restructuring charges incurred in Q1. This was as a result of labour and office space reductions.
  2. At the beginning of 2023, Google adjusted the anticipated usable lives of servers and certain network equipment.
  3. Alphabet moved their annual employee stock-based compensation awards.
Total sales costs were $30.6 billion, up 3%, led by other cost of sales of $18.9 billion, up 7%. Compensation costs linked with data centres and other operations were the most significant. Then followed by content acquisition costs.
alphabet stock
Operating expenses increased 19% to $21.8 billion. Major contributions from labour and office space reductions. Alphabet’s operating income was $17.4 billion, down 13%, and its operating margin was 25%.
Net profit was $15.1 billion and there was $17.2 billion generated in free cash flow in Q1. In the previous 12 months this amounted to $62 billion.

DeepMind’s growing partnership

DeepMind Technologies, formed in 2010, is a British artificial intelligence research laboratory. It is a division of Alphabet stock. DeepMind was acquired by Google in 2014 and became an Alphabet Inc. wholly owned subsidiary following Google’s restructuring in 2015.

DeepMind’s is Alphabet’s AI business venture. It has a growing partnership with Google Services, Google Cloud, and Other Bets. DeepMind is included in Alphabet’s unallocated corporate costs as of Q1. Second, beginning of Q1 Google modified the process of allocating costs. The aim was to provide greater transparency for decision-making.

Google Services increased revenues by only 1% to $62 billion

Google stated that the mid term outlook remains uncertain, and the group is facing challenges in a difficult economic environment, and Q1 results reflected this. Foreign exchange headwinds have been reduced. In terms of Google Services, Q1 results in advertising underscore the robustness of search, with its unique ability to surface demand and deliver measurable ROI. FX had a negative impact, but search revenue growth was comparable to Q4.

 alphabet stock

Google Search and other ad revenues increased 2% to $40.4 billion in Q3. YouTube advertising revenues fell 3% to $6.7 billion. Network advertising revenues fell 8% to $7.5 billion. TAC was $11.7 billion, a 2% decrease, owing mostly to a shift in the mix between search and networks. Google Services operating income was $21.7 billion, a 1% decrease, with a 35% operating margin. 

Revenues mainly from YouTube and YT Music, increased by 9% to $7.4 billion. This was mostly due to continued high subscriber growth leading to a stabilisation in advertising spending. YouTube and YT Shorts will continue to be the focus and the ability to monetise will continue to develop.

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Google Cloud could help Alphabet Stock in the future

Across sectors and geographies, clients are increasingly relying on Google Cloud. Revenues increased by 28% to $7.5 billion for the quarter. GCP growth remains robust across geographies, industries, and products. Increases in both seats and average revenue per seat drove Google Workspace to achieve good results.

alphabet stock

Google Cloud earned $191 million in operating income and had a 2.6 percent operating margin. Google Cloud offers clients to digitally change their businesses, the investments in product innovation, go-to-market organization, and partner ecosystem achieved significant results. But due to slower consumption growth in Q1 customers cut GCP costs in response to the uncertain macro backdrop.

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Alphabet stock announced Q1 results. Google’s Internet dominance under threat from AI. A realistic future for YouTube.

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Warren William

Warren William

Meet the author behind Smartest-Data. Warren William has a career in Finance and Investments extending over 35 years, both on the Buy Side and Sell Side. His most recent roles include, developing Institutional Risk Management Programs for managing Equity and Fixed Income Risk.  Prior to this Warren William work in Alternative Investments, in Investment Management and as a Buy Side Equity Analyst. Warren William brings a wealth of knowledge and expertise to the table, providing in-depth analysis and commentary on the latest trends in the Stock Markets. Contact information: or Telegram +393339034488

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