Photo Credit: Photo Mix from Pixabay

Alphabet (Google) (Nasdaq: GOOG) recently reported its fourth-quarter results that failed to impress the market. Like other tech players, Google too is bracing for economic uncertainty while preparing to take on the growing power of ChatGPT.

Alphabet’s Financials

Alphabet’s fourth-quarter net revenues grew 32% to $76.05 billion, falling short of the market’s forecast of $76.53 billion. Net income was $1.05 per share, again falling short of the market’s forecast of $1.18 for the quarter.

By segment, revenues from Google Services that includes Search, Advertising, Android, Chrome, Hardware, Google Maps, Google Play, and YouTube fell 2% to $42.60 billion. Google Cloud revenues grew 32% to $7.32 billion. Revenues from Other Bets grew 24.9% to $226 million.

Operating income for Google Services fell to $21.10 billion from $25.99 billion a year ago. Google Cloud and its Other Bets are loss-making divisions. Cloud ended the quarter with a loss of $480 million and Other Bets reported a loss of $1.63 billion. During the quarter, Google Cloud’s revenue rose 32% to $7.32 billion.

Google’s annual revenue grew 10% to $282.8 billion. EPS was $4.56, down from $5.61 a year ago.

Google did not provide an outlook for the first quarter. The market is looking for earnings of $1.15 per share on revenues of $70.06 billion for the first quarter. For the current fiscal year, analysts expect earnings of $5.19 per share on revenues of $303.41 billion.

Alphabet’s Product Enhancements

Recently, Alphabet announced new AI tools for retailers. It announced the launch of a new shelf-checking AI solution built on Google Cloud’s Vertex AI Vision. It utilizes its database of facts about people, places, and things to provide retailers with the ability to recognize billions of products and ensure that in-store shelves are right-sized and well-stocked.

It also announced an update to its Discovery AI solutions, with a new personalization AI capability and AI-powered browse feature to help retailers upgrade their digital storefronts with more dynamic and intuitive shopping experiences. Google Cloud’s Recommendations AI solution launched new machine learning capabilities to empower retailers to dynamically optimize product ordering and recommendations panels on their e-commerce pages and deliver personalized suggestions for repeat purchases.

But the big news for Google has been the launch and the growing popularity of OpenAI’s ChatGPT. Google has been developing its conversation technology solution called Language Model for Dialogue Applications (LaMDA). There have been several reports to suggest that ChatGPT’s search will work a lot better than Google, taking much of Google’s search share away. However, experts disagree on ChatGPT’s might right now. The solution has severe limitations especially around ensuring that it only presents facts, removes bias and toxicity, and ensures user safety.

But these limitations have not stopped Google from flexing its AI muscle. It is currently testing its LaMDA service internally and plans to release chatbots soon to allow consumers to use products that can act “as a companion to search.” It also recently announced plans to invest $400 million in Anthropic, a ChatGPT competitor. As part of the deal, Anthropic will use Google’s cloud computing services, and gives Google a 10% stake in Anthropic. Anthropic’s language model assistant is known as Claude and is yet to be released to the public. Anthropic plans to expand access to the chatbot in the current year.

Its stock is trading at $104.78 with a market capitalization of $1.36 trillion. It hit a 52-week high of $144.16 in January last year and a 52-week low of $83.45 in October last year.

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