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My initial takeaways: - Alphabet is experience massive decline in revenue growth. (Only 6% YoY growth vs 41% YoY growth in 2021) - Internal costs are sharply
by alberth 4y ago
My initial takeaways:
- Alphabet is experience massive decline in revenue growth. (Only 6% YoY growth vs 41% YoY growth in 2021)
- Internal costs are sharply increasing (Only a 25% Operating Margin vs 32% last year). A 7-point swing is massive. To put this into perspective, outside of tech, most companies only have ~10-point Operating Margin. So this swing of 7 points in margin, for most companies, could be the difference between being profitable vs not.
- Even though they are generating more total revenue than last year (same quarter) - they are considerable less profitable overall ($14B this year in Net Income vs $19B last year same quarter). This is related to the previous bullet.
Alphabets stock is -6% in after hour trading.
- alphabetting 4y agoI think it's dofficult to compare 22 to 21 and 21 to 20 given COVID.
- gigatexal 4y agoTrue, but earnings are earnings. And a substantial drop in organic earnings is nothing to ignore.
- marcyb5st 4y agoDisclaimer: Googler here but opinions are my own. I think what happened was a the perfect storm: remote working made people be more at home and so more time spent online. Additionally, stimulus checks were juicy targets for advertisers that tried to sell people stuff to spend time. Now, we are having inflation due to all those stimulus checks that forced central banks to hike interest rates. Moreover, energy prices and supply chains disruptions exacerbated the situation by driving more inflation and the cost of doing business. Advertisers understandably prefer spending less money. Under these circumstances such a drop in unsurprising IMHO. Similar to the drop in Q1/Q2 2020. EDIT: I wrongly used stimulus checks as an umbrella term. I really meant all the actions that pumped a lot of money into the economies.
- khazhoux 4y agoFriendly advice: As a current googler, you should refrain from posts like this, even with the “opinions are my own” disclaimer. You have access to internal info that shapes your opinion, etc. Even an innocent post such as this is potentially a breach of your employment contract.
- marcyb5st 4y agoThanks!
- fragmede 4y ago"Potentially" is doing a lot of work there. If the lawyers get involved, marcyb5st is going to have to explain themselves and their comment, but their lawyer is going to ask about what material information is in the comment. The social media policy requires the disclaimer, btw. Current Googler, opinions are my own.
- khazhoux 4y agoAt Apple, you could get shown the door if a cranky VP catches you opining on why revenue is down. All I’m saying is: best to avoid any post that is related to company internals in any way. The “New York Times” rule and all that.
- runnerup 4y agoIt's probably slightly less risk, yes. But Google has a specific policy about this and they are following it to the letter. This is pretty low-risk as far as things go. Apple has very, very different policies on this than Google. Google is getting more conservative, but it's still a long way from Apple.
- Godel_unicode 4y agoApple is also very famously way out on their own with these kind of policies. That’s not real life.
- 4y ago
- bushbaba 4y agoIt's fair when profit margin is lower than pre-covid.
- wwkeyboard 4y agoI agree, it would be more interesting to see these numbers for the last 4 years.
- alphabetting 4y agoComparing today's revenue #s to 2018 - GOOG: 106% - MSFT: 69% Using last quarter to corresponding 2018 quarter because these haven't released yet. - AMZN: 130% - META: 118% - AAPL: 55.8%
- a-dub 4y agoit's interesting to me that anyone would try to consider absolute results over the last few years. I feel like there should be some kind of consumer behavior/overall market beta factor that normalizes results with respect to the extraordinary conditions that have played out over the past few years. comparing year vs. year over the last few years seems to make no sense to me.
- thisarticle 4y agoI don’t understand the second point. That’s still 2.5x most companies. That sounds great.
- Godel_unicode 4y agoThe trend is concerning, and this is graded on a curve. If you want to exceptional valuations you need exceptional numbers (or exceptional sentiment).
- spaceman_2020 4y agoMost companies also trade at a much lower P/E to reflect their lower margins.
- JumpCrisscross 4y ago> costs are sharply increasing Operating costs ballooned $7.9bn, nearly 18%. That's nuts.
- arthurcolle 4y agoWhat is this attributable to?
- colinmhayes 4y agoBasically the entire business I guess. Cost of revenue, R&D, ales/marketing, and general are all up around 15%.
- hotpotamus 4y agoThose developer salaries have to come from somewhere I assume.
- onlyrealcuzzo 4y agoHeadcount almost double since the Pandemic.
- arthurcolle 4y agoThere it is. This makes sense, I must have missed this. That is bonkers. So many engineers but still shut down products every few weeks. EDIT: Still FURIOUS they shut down Stadia. I hate you Google
- akomtu 4y agoOne subtle deception in such reports is that dollar v22 is 30% smaller than dollar v21, so $14B x USDv22 is way worse than $19B x USDv21, about 2x worse I'd say.
- nequo 4y ago> dollar v22 is 30% smaller They seem to be using the same font size for both years. Or by smaller, do you mean that there was a 30% inflation from 2021 to 2022?
- metadat 4y agoA USD is a USD, how did you arrive that I can only purchase 70% as much of something in 2022 compared to 2021? Most dollars printed eventually find their way back to the fed through taxation.
- mmcconnell1618 4y agoFinancials are often reported in "constant dollars" and inflated dollars so you can see the impact of both.
- karmasimida 4y agoIt means pip is coming big for Googlers
- nikcub 4y agoFurther: - headcount from 150k to 186.5k (!) - EMEA + APAC largely driving slowdown in growth as both regions were -2%, USA + Americas are still at +12% Feel like this might be a pattern this quarter - declining margins + growth as companies over-extended themselves last year not foreseeing just how bad things are outside of the USA + Americas
- fbergen 4y agothey keep iterating that foreign exchange is a big part of the non-US decline, but I fail to find how much in the PDF
- alberth 4y ago“Our third quarter revenues were $69.1 billion, up 6% versus last year or up 11% on a constant currency basis.” Constant currency means excluding impacts of FX. 11% growth (constant currency) vs 41% growth last year is still has huge slowdown in growth.
- xbfjvusb6 4y agoStupid high dxy makes international markets tighten the purse strings. Whowouldathunkit.
- fierro 4y agorevenue outside USA will be taking a hit due to current forex trends
- jonas21 4y agoThis points to what an anomaly 2021 was. Alphabet was seeing around 15% YoY revenue growth prior to 2021. Then 2021 hit and the growth rate jumped to 41%. Now with the 6% YoY growth this year, it's evening out to ~22% annualized growth over the last 2 years.
- antupis 4y agoIt was peak of VC-bubble or whatever we are going to call it, and now we are going to probably see similar period as post dotcom bubble.
- rippercushions 4y agoIt was also peak COVID, so anything involving spending money online had a field day.
- spaceman_2020 4y ago2020-21 were just weird as hell and no one should be making long term decisions based on these glitches in our timeline.
- enos_feedler 4y agoWhat we can’t point to yet is what comes next? Continued growth or are we nearing a peak? Hopefully cloud can turn on profit mode soon
- andsoitis 4y agoIf I'm reading the financials correctly, ads constitute just shy of $54b in earnings while Cloud just $6b. As long as consumers are buying stuff, companies will advertise to them. As long as Google has a captive audience and they can continue to mint keywords for advertisers to bid against, I think this flywheel continues.
- hungryforcodes 4y agoAnd yet their search product results are declining rapidly in terms of quality. So much so that people in HN report having to write "reddit" at the end of their queries to get reasonably interesting results. Sure HN notices this first, but for sure the "regular people" are not far behind. Still, there are no good alternatives -- yet. You can bet if Google is the new Altavista, then the new Google is just over the Horizon waiting to steal their ad revenue...
- jeffbee 4y agoAdvertising margins are very high and cloud margins are very low, so the expectation that their cloud platform will grow and the expectation of high margins are sort of in tension.
- JoshTko 4y agoSundar took the easy way of trying to force revenue growth at all costs and achieved it in 2021, but the tactics are not long term sustainable and have slowed growth and profitability. Even more concerning is Sundar has no product vision. He focuses on technological capabilities and not value to people.
- enos_feedler 4y agoThat is pretty general, but more important seems untrue. All I ever heard Sundar say both internally and externally was about making Google “more helpful”. He said it so much and it was such a boring and bland statement that it really frustrated and nearly angered me. So yes, he lacks vision and specific product strategy here, but I think he is trying (badly) to move the narrative away from technology towards people
- brookst 4y agoYour statement isn’t entirely incompatible with the one your’re replying to. Sundar may think that “more productive” is a technology statement, which would reflect a serious lack of product vision. He may even think he’s focusing on people despite having exec planning sessions all framed as “technology that lets people do ______”.
- enos_feedler 4y agoThe only thing I am refuting is his focus on technology. By beating the constant drum of “be helpful in peoples live” he is making the help explicit but the technology is implied. My point is he doesn’t _focus_ on technology. He is trying to get the company to focus on people