Google’s revenue continues to grow as its profits are still shrinking

Earlier this summer, Google’s parent company Alphabet made it clear that it was trying to get into fighting form as its profits slipped. The company’s earnings report, released on Tuesday, however, shows that it still appears to be on the same path of growing revenue but shrinking profits.

This quarter, the company reports that it earned around $69 billion and made $13.9 billion in profit. That’s compared to its exceptional Q3 2021, when it brought in $65.1 billion in revenue, netting $18.9 billion and making for a fifth straight quarter of record-breaking profits. As another point of comparison, the company earned almost $69.7 billion last quarter, with profits of around $16 billion.

Most of Google’s businesses have grown year over year: advertising brought in $54.4 billion, up from $53.1 billion, and Google Cloud jumped from $4.9 billion in Q3 2021 to almost $6.9 billion in 2022 — though it’s worth noting that the company’s losses on its cloud division are also up, going from $644 million to $699 million. It’s also losing even more money on its “other bets” category: approximately $1.6 billion this year, compared to almost $1.3 billion last year. Revenue from YouTube ads, however, has shrunk slightly, as has its income from Google Network.

During Google’s earnings call, CEO Sundar Pichai noted that the company recently had its “highest selling week ever for Pixel,” after it introduced the Pixel 7 and 7 Pro, along with its Pixel Watch.

Alphabet’s push for a “sharper focus,” outlined in a memo from earlier in the year, brings us to the matter of the company’s people. Near the end of Q2, CEO Sundar Pichai told employees that the company could face difficulties under tough economic conditions, and that it would have to be hungrier. A quote from Pichai in the press release echoes that, saying, “We’re sharpening our focus on a clear set of product and business priorities.”

To that end, Google has been working on reviewing its headcount. Despite that, the company reports it grew compared to last quarter: in July, it had 174,014 employees, and that count is now at 186,779.

The company’s been not so quietly reducing its numbers by getting rid of or reorganizing specific teams and giving former members a window to find new roles within the company, knowing that not all of them will. But that process means they may not officially leave its roster for weeks or months. “Our actions to slow the pace of hiring will become more apparent in 2023,” said CFO Ruth Porat during the company’s earnings call.

Recently, there have been notable examples of teams that it may be trying to downsize; in September, it shut down a project and team for a next-generation Pixelbook. (The company told The Verge, “In times where we do shift priorities, we work to transition team members across devices and services.”) The same month, it announced that it was giving Stadia, its cloud gaming service, the ax as well and reportedly shut down half the projects at an internal startup incubator. Google (somewhat ironically given the Pixelbook situation) is doubling down on hardware like its latest Pixel devices, but a recent report from The Information suggests that services like Assistant that feed into products Google doesn’t make could be in line for more cuts.

You can listen to Alphabet’s earnings call, where it discusses its results, here.

Update October 25th, 6:01PM ET: Updated with information from Google’s earnings call.

Source: The Verge

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