Alphabet is trying to streamline their Business by reducing Costs

Alphabet (NASDAQ: GOOGL) announced its 2022 Q4 financial results on February 2, 2023.  According to the announcement, revenues were up 1% (YoY, 3 months). On the other hand, operating income and net income were down 17% and 33%, respectively.

In addition, the company recorded operating margin of 24% (-517bp, YoY, 3 months).

Looking at the trends in costs and expenses, cost of revenues was up 7% while research and development expenses were up 7% (YoY, 3 months). Thus, the higher costs due to inflation could have impacted the company’s business performance.  

However, sales and marketing expenses are down 6%. This indicates that the company is implementing cost reductions as of 2022 Q4.  In contrast, general and administrative increased by 23%. Thus, employment costs as well as office expenses could have been soaring. At present, Alphabet has announced plans to streamline their business by reducing personnel costs and optimizing its global office space. 

Looking at revenues by segment, Google Network showed the biggest drop of down 9% (YoY, 3 months). It was followed by YouTube ads of down 8%.  On the other hand, Google Cloud showed strong growth of up 32%.

By region, United States was up 6% and the other Americas was up 5% (YoY, 3 months).  On the other hand, EMEA was down 6% and APAC was down 6%.

In twelve months, net cash provided by operating activities was inflow of 91,495 million USD, down 0% year-over-year (TTM).  As for the free cash flow, the company recorded inflow of 1,197 million USD, up 27% year-over-year.

The significant increase in free cash flow was at least partially thanks to reduction in the amount of purchases of marketable securities.  However, the amounts of acquisitions and purchases of intangible assets are increasing. This indicates that the company continues to conduct upfront investment by acquiring softwares and intellectual properties.

Alphabet Inc. (NASDAQ: GOOGL) Stock Chart

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