10-QPeriod: Q1 FY2023

Alphabet Inc. Quarterly Report for Q1 Ended Mar 31, 2023

Filed April 26, 2023For Securities:GOOGLGOOGGOOGMGOOGN

Summary

Alphabet Inc. reported first-quarter 2023 revenues of $69.8 billion, a modest 3% increase year-over-year. This growth was primarily fueled by a significant 28% surge in Google Cloud revenue, which reached $7.5 billion. While overall revenue growth was tempered by foreign currency headwinds, excluding these effects, revenues grew by a stronger 6% on a constant currency basis. The company also incurred substantial charges related to workforce reductions and office space optimization, impacting profitability. Net income for the quarter was $15.1 billion, a decrease from the prior year's $16.4 billion, partly due to these restructuring costs and a higher effective tax rate. Despite a challenging macroeconomic environment, Alphabet demonstrated resilience in its core advertising business, with Google Search & other revenues increasing by 2%. However, YouTube ads and Google Network revenues saw declines. The company continued its aggressive share repurchase program, returning $15.1 billion to shareholders in the quarter. Strong operating cash flow of $23.5 billion was generated, and capital expenditures were reduced compared to the previous year, reflecting a more disciplined approach to investment. Investors should monitor the continued growth trajectory of Google Cloud and the impact of ongoing restructuring efforts on future profitability.

Financial Highlights

50 data points
Beta

Revenue

$69.79B

56.1% Gross Margin

Net Income

$15.05B

21.6% Net Margin

EPS (Diluted)

$1.17

Total Assets

$369.49B

Cash & Equivalents

$25.92B

Free Cash Flow

$17.22B

Financial Statements
Beta
Revenue$69.79B
Cost of Revenue$30.61B
Gross Profit$39.17B
R&D Expenses$11.47B
Operating Expenses$52.37B
Operating Income$17.41B
Interest Expense$80.00M
Net Income$15.05B
EPS (Basic)$1.18
EPS (Diluted)$1.17

Key Highlights

  • 1Total revenues increased by 3% to $69.8 billion, driven by Google Cloud's 28% growth.
  • 2Operating income decreased by 13% to $17.4 billion, impacted by $2.5 billion in charges for workforce reductions and office space optimization.
  • 3Net income declined by 8% to $15.1 billion, with diluted EPS falling to $1.17 from $1.23.
  • 4Google Search & other revenues grew 2% to $40.4 billion, while YouTube ads and Google Network revenues declined.
  • 5Google Cloud revenues increased 28% year-over-year to $7.5 billion, a key growth driver.
  • 6The company repurchased $15.1 billion of its stock in the quarter, underscoring its commitment to capital return.
  • 7Operating cash flow remained strong at $23.5 billion, though slightly down from the prior year.

Frequently Asked Questions

The primary driver of revenue growth was Google Cloud, which saw a significant 28% increase year-over-year, reaching $7.5 billion. This segment continues to be a strong growth engine for Alphabet.

The decrease in net income and operating income was largely due to substantial charges incurred for workforce reductions ($2.0 billion) and office space optimization ($0.56 billion) in the first quarter of 2023. Additionally, a higher effective tax rate and a slight decline in YouTube ads and Google Network revenues also contributed.

Alphabet continued its substantial commitment to shareholder returns through its share repurchase program. In the first quarter of 2023, the company repurchased $15.1 billion of its Class A and Class C shares. A new $70 billion repurchase authorization was also approved in April 2023.

The core advertising business showed mixed results. Google Search & other revenues increased by 2%, indicating resilience. However, YouTube ads and Google Network revenues experienced declines, partly attributed to foreign currency fluctuations and other market dynamics. The company reported an 8% increase in paid clicks but a 7% decrease in cost-per-click.