Google Reported Very Upbeat Quarterly Numbers, with Particularly Strong YouTube Economic and even Google Cloud Catching Up!

Google (GOOGL) reported its Q4 earnings, with revenue and EPS beating expectations. The core business of Alphabet (Google) is benefiting from AI, and the company's CEO anticipates that the best is yet to come. However, the stock fell in extended trading due to tough competition for ad budgets and high-interest rates. This can also be attributed to positive investor sentiment that resulted in too high expectations before earnings.

Operationally, despite double-digit growth in nearly every revenue segment, Google's web was down about 2% YoY and down about 10% compared to Q4 2021. Google's incremental margins also remained at 54% in Q4 2023, but the company's costs seemed creeping up a bit too high. YouTube ad growth also accelerated during the quarter. YouTube shorts are now viewed 70 billion times a day. After disappointing investors last quarter, Google Cloud also beat estimates this quarter (by about 22%). Google One is growing very well and has nearly 100 million subscribers.

Financially, Google generated $7.9 billion in free cash flow last quarter and repurchased $16 billion worth of stock. Google's headcount remained essentially flat compared with the previous quarter, but capital expenditures as a percentage of revenue rose to 12.8% in the reporting quarter of 2023 from Q1 2022.