Alphabet stock slips after missing expectations on Google ad revenue

Google parent company Alphabet (GOOG, GOOGL) reported its fourth quarter earnings after the bell on Tuesday, missing analysts’ expectations on ad revenue, the heart of the tech giant’s business.

The stock slid over 5% lower in premarket trading Wednesday, part of a broad decline for the tech-heavy Nasdaq.

Revenue, excluding traffic acquisition costs for the third quarter, was $72 billion versus expectations of nearly $71 billion. That’s higher than the $63.12 billion the company generated during the same period in the prior year. But investors seemed to focus on the advertising miss.

The company reported continued growth in its cloud business, which has grown in importance to investors because of its usefulness in the development of AI. Google Cloud revenue beat expectations, crossing $9 billion, amounting to a 26% jump from a year ago. The company has been pushing to claim additional market share in the cloud computing market, where it currently sits in third place behind competitors Amazon (AMZN) and Microsoft (MSFT).

Here are some of Alphabet’s most significant metrics compared to what Wall Street was expecting in the company’s fiscal fourth quarter, according to data from Bloomberg:

• Revenue, excluding traffic acquisition costs: $72.32 billion vs. $70.97 billion expected ($63.12 billion in Q4 2022)

• Adjusted earnings per share: $1.64 vs. $1.59 expected ($1.05 in Q4 2022)

• Cloud revenue: $9.19 billion vs. $8.95 billion expected ($7.32 billion in Q4 2022)

• Ad revenue: $65.5 billion vs. $65.8 billion expected ($59.04 billion in Q4 2022)

During a call with analysts, both CEO Sundar Pichai and CFO Ruth Porat noted the importance of streamlining the business to achieve cost savings and efficiency.

“Across different teams we have wound down some non-priority projects which will help us invest and operate well in our growth areas,” said Pichai.

Porat said the company is focused on removing organizational layers to boost efficiency, which has resulted in a slower pace of…