Google’s latest earnings confirm new hardware focus, fewer moonshots, and economic downturn
Google’s parent company, Alphabet,announced its quarterly earnings for Q3 2022this week. The company reports a revenue of $69.1 billion, which is 6% more than the same period last year (or 11% when adjusted for inflation). At the same time, the company reports a lower operating income, making only 17 billion rather than 21 billion in Q3 2021. What’s more interesting than these raw numbers is a new humbleness and focus for the company, though.
As anearlier report already indicated, Google is shifting its focus away from moonshot projects that don’t make money immediately and focuses both on its core products and one single bet: Self-made hardware. As part of the earnings call, Google and Alphabet CEO Sundar Pichai said, “We’re sharpening our focus on a clear set of product and business priorities. Product announcements we’ve made in just the past month alone have shown that very clearly, including significant improvements to both Search and Cloud, powered by AI, and new ways to monetize YouTube Shorts.“
To add to that, Google and Alphabet CFO Ruth Porat stated that “Financial results for the third quarter reflect healthy fundamental growth in Search and momentum in Cloud, while affected by foreign exchange.” To combat these issues, the company is “working to realign resources to fuel our highest growth priorities.”
Google has a number of announcements to look back at from the last few months that make clear where its priorities lie. There was of course the big October launch of theGoogle Pixel 7 Proand its smaller sibling, alongside the very first self-made Wear OS watch, theGoogle Pixel Watch. The Pixel Watch, in particular, makes clear that the company would like to offer flagship hardware of its own for the software that it builds. The only piece of the puzzle that doesn’t fit is the fact that Google only recently shuttered its Pixelbook division, making clear that we don’t have to expect a Google-made Chromebook anytime soon.
As indicated by Pichai, the company also made announcements surrounding its core search products in October. A redesigned mobile search experience with an emphasis on photos and videos makes it easier to explore new places and products, and helps you dive into topics deeper, all without ever having to leave the Search interface. The company is also looking to make its nonverbal search options as part of Google Lens better, with improvements to multisearch, a feature that lets you search with both images and text.
It’s always been speculated that Google’s budget Pixel a-series is likely the division that moves the most units, and it seems that trend is confirmed as part of the earnings call. TheGoogle Pixel 6a, launched in the middle of 2022, is highlighted as the product that contributed to growth in the hardware division. Porat says, “We delivered solid growth in hardware revenues, primarily from sales of the Pixel 6a.” However, this growth was offset by declines in Play Store revenue, as people spend less money for entertainment and apps.
Google also indirectly made clear that it would run its business differently going forward, with less of a focus on money-losing moonshots. The company is looking to sharpen its focus on the products that it knows work, and the hardware to support its software even when other manufacturers like Samsung are struggling.
All in all, it’s clear that Google has stopped running business as usual in the midst of economic downturn. A more sharpened vision on core products might not be the worst idea, though, given how scattershot Google’s efforts often seem. Who knows, maybe the company will finally reward its employees for optimizing and perfecting existing products going forward, rather than only promoting those involved in new launches. It would definitely benefit both Google workers and consumers. The latter could finally rely on Google as a dependable services provider.
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