Google’s parent company, Alphabet, just held its Q4 earnings call, and like much of the tech industry, the company had a less than stellar end to 2022. However, the outlook wasn’t bleak across the board — several of Google’s more consumer-oriented ventures had a solid quarter, leading the company to promise an increased focus on products like YouTube Shorts,YouTube Music, and itsPixel lineof phones,earbuds, andsmartwatches.
According tothe report, operating income was at $18.1 billion in Q4 2022, down 17% from last year’s $21.9 billion. Net income in the fourth quarter was down 34% year over year, from $20.6 billion to $13.6 billion. Numbers for the full 2022 fiscal year were less grim, with operating income only falling from $78.7 billion in 2021 to $74.8 billion in 2022 (-5%), and net income dropping from $76 billion to $60 billion (-21%). Interestingly, overall revenues were up 1% YoY to $76 billion, pointing to increased operating costs as the primary driver of negative growth in the quarter.
Google’s Pixel lineup had a surprisingly strong 2022. According to Alphabet CEO Sundar Pichai, “2022’sPixel 6a, 7, and7 Proare the best-selling generation of phones” the company has ever launched. Pichai went on to note that Pixels “gained share in every market” Google operated in this year. When pressed for comment, the company’s chief executive had this to say about the growth of the flagship phone lineup:
Very, very pleased with how Pixel has performed through a challenging macro environment. Look, I think our computing portfolio is incredibly important. It’s what allows us to … invest and drive innovation forward.
Alphabet CFO Ruth Porat offered some insight into Google’s plans for increased focus on its Pixel phones in 2023, stating that, “We continue to make sizable investments, particularly to support innovation across our Pixel family, while working to drive greater focus and cost efficiencies across the portfolio.” Pichai mirrored that sentiment, adding, “We are working to improve the economics and hardware as we focus more intently on the Pixel line and our overall cost structure there.”
Google isn’t just seeing growth in its Pixel phones — thePixel Watchis apparently off to a good start as an ambassador ofWearOSand Google’s growing hardware ecosystem. Per Pichai, “I think users are thinking beyond phones and thinking through a holistic ecosystem. To give one example, us undertaking Pixel Watch, and as part of that, integrating Fitbit and bringing it to our ecosystem as well, partnering closely with Samsung on wearables. The combination is what has driven over a 300% increase in actives on [the] Android watches ecosystem.”
Google is also prepping for a big year with its AI technologies, perhaps after feeling the pressure of competition with the success ofChatGPT. Pichai revealed that some of Google’s more mature AI models will be made available to the public in the coming months, starting with the conversationalLaMDA, and perhaps being followed by the more mathematical PaLM. This aligns nicely with recent reports that the company has been testing aChatGPT competitor for Google Search called Apprentice Bard.
These numbers come on the heels of aQ3 2022 earnings reportthat saw increased year-over-year revenue, yet a drop in operating income for Alphabet. Meanwhile, theQ2 2022 financial reporthad modest YoY increases across the board, and theQ1 2022 reportnoted more robust earnings when compared to the previous year. So, there’s an obvious downward trend across the last four reports, but Alphabet appears hopeful that investing in these more recently successful ventures will set things right in 2023.
