Alphabet Announces Second Quarter 2023 Results [pdf]

[umeshunni]

> In January 2023, we completed an assessment of the useful lives of our servers and network equipment and adjusted the estimated useful life of our servers from four years to six years and the estimated useful life of certain network equipment from five years to six years. This change in accounting estimate was effective beginning in fiscal year 2023, and the effect was a reduction in depreciation expense of $966 million and $2.0 billion and an increase in net income of $752 million and $1.5 billion

Interesting accounting magic

[ot]

It is not an accounting trick, it means they'll actually hold on to those servers longer than originally planned, meaning they'll buy fewer servers to replace them over the long term. That's actual savings.

The accounting "magic" is that they can claim the savings today, but that's just normal amortization.

And this will increase their server failure rate, but probably not enough to move the needle in terms of the random failure buffers they account for.

[HDThoreaun]

They also took a large one off hit from the layoffs over the last 6 months. I think the layoff hit was less than the gain on the equipment recategorization but it does sort of even out a bit.

[redox99]

To be fair 4 years for a server seems like very little.

[Spooky23]

If you run a lot of Windows servers, it’s sometimes cheaper to run old stuff longer as they are raising prices on a per core basis.

I was stuck supporting one of these environments, and made a business case to overbuy the hardware a few years ago when they did a “free” socket to core migration. They’re still running those things, as the maintenance on the servers is less than paying for more cores.

[bgirard]

Is that $2.0b for network equipment by increasing it's depreciation period by 20%? Meanwhile increasing the deprecation period of servers by 50% only nets $1.0b?

I had the impression that servers were vastly more expensive than network equipment. I wonder what the breakdown is for network equipment.

[rasz]

so This is how they managed to pretend clout didnt make a multi hundred $million loss this quarter for the first time ever.

[IAmNotACellist]

That's like being told inflation is down because you can eat less

[sebmellen]

Interesting accounting magic indeed. It seems like tricks like this make it remarkably easy to game stock price. Are there any controls on this?

[itronitron]

Hmm, if those servers are handling less traffic then their 'useful life' will be extended.

[impulser_]

Ads is still growing and very profitable, YouTube is back to growing, GCP profitable for two quarters in a row, and lower losses on other bets.

Google is still Google.

[atlasunshrugged]

GCP is an interesting one -- I helped a company go through some of the hoops for GCP and AWS and the former was... difficult. It felt like someone tried to copy AWS, didn't fix all the links or think the whole thing through, and just sort of put it out there. I remember we were locked out of our account for like a month for some reason and there was a lot of handoff between different reps, for churn or for some business process reason I wasn't aware of, but it was a pretty jarring experience that made us not want to invest a lot of time there

[gmerc]

It’s growing because they are slaughtering golden geese at an alarming rate propping up growth

- Youtube ads assault - Endless scrolling on SERP to show more ads as you need to scroll through degrading results. - etc

every surface has increased ad load, every service increased prices. So of course that props up growth.

Ads is in full value extraction mode now, the question is, how sustainable it is, but that’s a question for another quarter

See Facebook the same. You can’t share actual links outside the app anymore which drives engagement as every user clicking on a link now goes back right to being a monthly active

[nine_zeros]

I myself contributed to those ad earnings by watching 4 ads in a 10 min video.

[ra7]

Interesting news about Ruth Porat transitioning to President and Chief Investment Officer of Alphabet:

> Alphabet and Google CFO Ruth Porat will assume the newly created role of President and Chief Investment Officer of Alphabet and Google, effective September 1, 2023. Ruth will continue to serve as CFO, including leading the company’s 2024 and long-range capital planning processes, while the company searches for and selects her successor.

> In her new role, Ruth will continue to report to Sundar Pichai, Alphabet and Google CEO. > Ruth assumed the role of CFO in May 2015 and is the company’s longest-serving CFO.

> In her new role, Ruth will be responsible for Alphabet’s investments in its Other Bets portfolio, working closely with Sundar, and the company’s investments in countries and communities around the world. Alphabet’s investments span numerous sectors and are engines of economic growth globally. She will also focus on engagement with policymakers and regulators regarding employment, economic opportunity, competitiveness, and infrastructure expansion.

Does this mean cuts a.k.a. "streamlining" incoming for Other Bets? She has been known to be pretty strict about unnecessary spending at Google.

[dekhn]

I can't imagine her new role is going to be friendly to Verily.

[samspenc]

Quarterly numbers from their report:

  - Revenue: $74.6 billion, up 7% YoY
  - Operating income: $21.8 billion
  - Operating margin: 29%
  - Net income: $18.3 billion

[wslh]

How do you play with inflation numbers around the world? 7% YoY does not seem an increase. US official inflation rate is 8% and inflation is calculated based on a basket that is different from inflation based on specific industries.

[atlasunshrugged]

Looks like the money machine is still printing! Anyone done deep analysis on how their "other bets" have been performing over time? It feels like a few things have been cut (e.g. Loon) but I haven't been following closely enough to have a good understanding of the full picture

[justinwp]

Other Bets Operating Income (Loss): 2022 (1,339), 2023 (813)

[sakopov]

Looks like great earnings for probably one of the most undervalued large caps on the market right now (and Amazon).

[justinwp]

The company reported EPS of $1.44 vs. Consensus of $1.34 and Revenues of $74.6 Billion vs. $72.85 Consensus.

[beckingz]

up 7000 employees despite layoffs.

[samspenc]

I thought this was interesting, so I compared it against their count last quarter (instead of last year) and they are indeed down.

  - In Q4 2022 [1] they had 190,234 employees.
  - In Q1 2023 [2] they had 190,711 employees.
  - This quarter Q2, they have 181,798 employees.

So they are down almost 9000 employees from last quarter, close to their 12K layoff number.

[1] https://abc.xyz/assets/c4/d3/fb142c0f4a78a278d96ad5597ad9/20... [2] https://abc.xyz/assets/a7/5b/9e5ae0364b12b4c883f3cf748226/go...

[Barrin92]

they could fire half their workforce and they'd be back to 2019 numbers

https://www.statista.com/statistics/273744/number-of-full-ti...

[itsthecourier]

If you have to let leave some apples without scaring the other ones, doing it while everybody else is doing it is a great chance

[bluefishinit]

It's been about 6 months since the Google CEO blogged about how they needed to lay of 12,000 people to brace for the "difficult economic cycle". Meanwhile revenue is up 7% YoY.

https://blog.google/inside-google/message-ceo/january-update...

[jayadeeptp]

Looks like the number of employees increased from 174,014 to 181,798. This includes the 12,000 laid-off employees.

[harha]

Looks like they weren’t really needed to add to that revenue.

[late2part]

https://en.wikipedia.org/wiki/The_Time_Machine

... A work of future history and speculative evolution, Time Machine is interpreted in modern times as a commentary on the increasing inequality and class divisions of Wells' era, which he projects as giving rise to two separate human species: the fair, childlike Eloi, and the savage, simian Morlocks, distant descendants of the contemporary upper and lower classes respectively ...

... Deducing that the Morlocks have taken his time machine, he explores their tunnels, learning that due to a lack of any other means of sustenance, they feed on the Eloi. The Traveller theorizes that intelligence is the result of and response to danger; with no real challenges facing the Eloi, they have lost the spirit, intelligence, and physical fitness of humanity at its peak. ...

[superfrank]

Weren't most of the layoffs in big tech done to shed positions related to recruiting or kill off floundering projects in R&D? If so, revenue is the wrong number to be looking at.

[solumunus]

So inflation adjusted they’ve experienced no growth.

[fourseventy]

People make mistakes and economic conditions change...

[billylo]

After hours trading: GOOG up 6.8% to $131/share

[mvncleaninst]

> Google Services includes products and services such as ads, Android, Chrome, hardware, Google Maps, Google Play, Search, and YouTube. Google Services generates revenues primarily from advertising; sales of apps and in-app purchases, and hardware; and fees received for subscription-based products such as YouTube Premium and YouTube TV.

Interesting how they bundle chrome, android, and pixel with various web services such as search, yt, maps

Kind of odd considering pixel is a completely different kind of product. It does make sense because there's likely synergy between first group and second group, but also it makes me wonder how they calculate the profitability of a product like pixel

Also it makes me wonder whether the recent proposal of the chrome integrity API will positively or negatively effect these numbers long term given sufficient backlash

[seydor]

I ran some google ads lately and they were very ineffective. I feel like my money was going down the drain. Perhaps that's what s driving their higher revenue?

[alphabetting]

Ineffective ads wouldn't drive higher revenue. It would be the opposite.

[2OEH8eoCRo0]

I was tempted to bet against them since every Google product seems to be getting worse- felt like getting blood from a stone.

[pschuegr]

There's a delay between the enshittification and the stock peak, we're in that window now.