Written | Edited by Sun Xiaowei | Pictured by Zhao Chenxi | IC PhotoWelcome to the WeChat subscription number of “Sina Technology”: techsina
Text / Sun Xiaowei
Source: DoNews (ID: ilovedonews)
On July 26, local time in the United States, Google’s parent company Alphabet (hereinafter referred to as Alphabet) released its Q2 financial report for the 2022 fiscal year. According to the financial report, Alphabet’s Q2 total revenue was US$69.685 billion, and revenue in the same period last year was US$61.880 billion, a year-on-year increase of 13%. Excluding the impact of exchange rate changes, the increase reached 16%; according to GAAP (US General Accounting Principles) Alphabet’s Q2 net profit was US$16.002 billion, compared with US$18.525 billion in the same period last year, down 14% year-on-year; diluted earnings per share were US$1.21, compared with US$1.36 in the same period last year, down 11% year-on-year.
The after-hours market reacted positively to the release of Alphabet’s Q2 earnings report. On the same day, Alphabet closed at $105.44 per share, down 2.56%. In after-hours trading, Alphabet shares rose to $110.13, up 4.87%.
Such stock price performance also confirms the intriguing attitude in the previous market: on the one hand, analysts still believe that Alphabet’s Q2 revenue and profit levels can reach an acceptable level; on the other hand, as a flagship company among Internet companies , even if Alphabet maintains its leading position, for the entire market, the risk of industry decline has begun to appear in the technology giants behind Alphabet. Compared with the asset figures that have been swallowed up, the giants in Silicon Valley need to Consider how to sustain Wall Street’s trust in yourself in an increasingly volatile environment.
It is in such a confusing situation that even if Alphabet, which holds the Q2 financial report answer sheet, is still immersed in the joy of going ashore, the same question will still appear in front of us very quickly: “Faced with an almost doomed downturn, who will Can you guarantee the stability of Alphabet?”
At risk of losing macro support
According to the Q2 financial report, Alphabet’s main financial data indicators were basically in line with analysts’ expectations.
Divided into the main revenue business, Alphabet’s structure remains stable: search and other business revenue was $40.7 billion, compared with $35.8 billion in the same period last year, a year-on-year increase of 13.6%; YouTube advertising revenue was $7.34 billion, compared with 7.9 billion in the same period last year U.S. dollars, down 6.8% year-on-year; Google Network revenue was $8.3 billion, compared with $7.6 billion in the same period last year, an increase of 9.2% year-on-year; Google Cloud revenue was $6.3 billion, compared with $4.6 billion in the same period last year, an increase of 36.9% year-on-year.
However, in terms of the trend of major financial data indicators, Alphabet’s answer is worthy of vigilance.
Using data from the past six full fiscal years as a reference, Alphabet’s revenue data almost tripled, starting with revenue of $90.3 billion in fiscal 2017 and ending with revenue of $257.5 billion in fiscal 2021. Based on this data growth trend, any organization that pays attention to this company must admit that it has entered the fast lane of rapid growth.
Alphabet’s accelerated process has become even more pronounced in the wake of the coronavirus pandemic, as measured by quarterly net profit. According to statistics, since the second quarter of 2020, Alphabet has entered seven consecutive quarters of rapid growth. In less than two years, single-quarter net profit rose rapidly from $6.959 billion to $20.642 billion, an upward trend that outpaced revenue growth in the past six full fiscal years.
By the end of 2021, Apple’s market value is nearly 3 trillion, Microsoft’s market value is 2.55 trillion, Alphabet ranks third with 1.92 trillion, Amazon ranks fourth with 1.73 trillion, and Meta, which ranks fifth, has a market value of only 930 billion.
With this round of rapid revenue growth, Alphabet, as the four flagship technology companies that go hand in hand with Apple, Microsoft, and Amazon, has entered the “trillion club” in market value.
However, since 2022, two consecutive quarters of financial report data have shown that the growth rate of single-quarter net profit has entered a low growth space: Among them, Alphabet’s Q1 net profit was US$16.436 billion, down 8.33% year-on-year; Q2 net profit was US$16.002 billion, year-on-year. It fell by 13.62%, and the net profit, which fell sharply in Q1, fell by 2.6% again.
Going back to three years ago, it is not difficult to see that Alphabet’s continuous seven-quarter net profit growth rate has been subtly connected to the process of the new crown pandemic.
Based on social control and work and entertainment needs for epidemic prevention, online demand in Alphabet’s major regional markets has surged. According to Gartner’s forecast, in 2019, the global IT cost expenditure will be 3.87 trillion US dollars, and in 2020, when the epidemic accelerates, the global IT cost expenditure will be 4.24 trillion US dollars. By 2022, the number of this expenditure item will reach 4.47 trillion US dollars. Dollar.
The huge market demand was then fed back to Alphabet’s market revenue. In fiscal 2019, Alphabet’s domestic market revenue in the United States was $74.843 billion. In fiscal 2020, in the context of the interaction between the economic brakes caused by the epidemic and the stimulus of loose economic policies, the revenue in the domestic market in the United States was $85.014 billion. In fiscal year 2021, when the new crown virus is open to coexistence, Alphabet’s revenue in the US domestic market has climbed to $117.9 billion, and the growth rate of domestic market revenue has increased from 13.5% to 38.6%.
However, it should be noted that although a relaxed economic environment will help the stable growth and prosperity of the digital economy market under the epidemic, from a macro perspective, major European and American economies have boosted the overall economy through stimulus measures since the epidemic. The vibration still did not achieve the desired effect.
At the same time, the continuous quantitative easing stimulus policy is causing economic harm: as of now, the yield gap between the US 10-year/2-year US Treasury bond has further expanded in the negative region, reaching -25.7 basis points at one point, and the inversion degree has hit 2,000. The deepest since the era of the Internet bubble in 2010, this curve has been in an inverted state for more than two weeks, and almost all observers believe that inversion can be regarded as an important economic recession indicator.
Entering 2022, in order to cope with inflation, some institutions predict that the Federal Reserve will raise interest rates six to seven times throughout the year.
In the context of the macroeconomic environment entering a deflationary cycle, although Alphabet’s market revenue has stabilized, the confidence in the investment market has been repeatedly hit. This also explains that Alphabet has still evaporated about 22% of its stock price despite the two consecutive quarters of financial reports since 2022.
Therefore, even if Alphabet has relatively stable revenue in its own market, it still needs to face the risk of losing macro support and the challenge of insufficient market confidence.
Privacy Policy: A cat-and-mouse game between giants
Alphabet’s achievements in market recognition are largely due to the fact that the fundamentals have not collapsed. Specific to the main line of business, advertising revenue is still the mainstay of Alphabet’s revenue: the revenue figure of $56.29 billion increased by 12% year-on-year.
The market’s positive response is due to the numbers themselves and the sadness among peer giants.
After the market on July 21, local time in the United States, Internet social giant Snap disclosed its 2022 Q2 financial report, with revenue of US$1.11 billion, a year-on-year increase of 13%, lower than market expectations of US$1.14 billion; net loss of US$420 million, compared with the same period last year. The loss increased by 178%; the diluted net loss per share was 0.26 US dollars, compared with 0.10 US dollars in the same period last year, the loss increased by 164%.
Coincidentally, Twitter, another Internet technology company, also announced its Q2 earnings report on July 22. Data shows that Twitter’s Q2 revenue was $1.18 billion, lower than analysts’ expectations of $1.32 billion, and $1.19 billion in the same period last year; Q2 net loss of $270 million, or 35 cents per share, was profitable in the same period last year. $65.6 million; excluding items such as stock-based compensation, an adjusted loss of 8 cents per share was far worse than analysts’ forecast for earnings of 14 cents per share.
Then the market immediately entered a pessimistic mood, and the key to the decline of the two giants was that the revenue of the advertising business was hit hard. But coincidentally, behind the unfavorable advertising revenue of both companies, there is the same shadow: AT&T.
ATT’s full name is APP Tracking Transparency Privacy Policy, which is a software framework agreement updated by Apple in the official version of IOS 14.5 on April 27, 2021.
According to the description of “User Privacy and Data Use” in the App Store: Developers need to obtain user permission through the AppTrackingTransparency framework before they can track users or access their device’s Advertising Identifier (ie IDFA).
Before that, both iOS and Android ecosystems could obtain relevant information without user consent by default. According to industry analysis, this policy sets and controls third-party applications from the traffic portal, which makes third parties lose the opportunity to actively analyze customer product preferences, and for third parties, loses the data on the optimization of advertising effects in the iOS ecosystem. Without the foundation, the key link of accurate advertising will be lost, and the technical soil of advertising revenue will be lost.
However, this concern is not present for first-party manufacturers, Apple is the case, and so is Alphabet.
Based on the strong system ecological construction and the high market penetration rate of consumer terminals, Alphabet, as a first-party manufacturer, not only has innate advantages in the fields of search and video entertainment, but also has perfected the avoidance and replacement of cookies and advertising logos. technical solution.
Moreover, in terms of the attitude of privacy policy, Alphabet has also repeatedly released signals to tighten user advertising data flow in the Android ecosystem, released a time roadmap for removing cookies, and added user permission control over advertising logos. These are all evidence that Alphabet is following suit.
Although the impact of the ATT policy on the industry is still inconclusive, from the actual effect, Alphabet’s repeatedly strong digital advertising business as the first-party data controller has indeed strongly supported Alphabet’s revenue for two consecutive quarters in 2022. .
It can be said that, standing on the commanding heights of business ethics, user privacy, Alphabet does not need to radically act as a subversive role in the old business order, but can also elegantly display and hide various business actions through horizontal and vertical business actions. commercial purposes.
It’s no wonder that after Snap’s share price fell 80% within the year, and Meta lost tens of billions of potential revenue due to its privacy policy, Zuckerberg would bluntly say: “Maybe they do it to help people, but these measures are clearly in line with them. competing interests.”
Obviously, it’s all more of a cat-and-mouse game.
The much-anticipated fulcrum and thorns all around
In the Q2 earnings report, another closely watched business revenue of Alphabet is Google Cloud. For a long time, Google Cloud has been regarded by the outside world as the best profit fulcrum of Alphabet after the advertising business. From the data point of view, the revenue of Google Cloud in this quarter continued its growth trend, and the revenue scale of 6.276 billion US dollars is still the largest in the world. The third-largest cloud provider, with a significant increase of 35.6% compared to $4.628 billion a year earlier. But on the all-important profitability level, the number of big losses in the previous quarter showed no signs of narrowing, and continued to lose $858 million in the current quarter, following a loss of $931 million in the first quarter.
As a company with technological innovation as an important corporate culture, Google Cloud’s advantages are more reflected in the PaaS and SaaS levels. Cloud computing capabilities and software ecological service capabilities are all areas where Google Cloud technology and operations focus.
However, it should be noted that according to the IDC report, by the end of 2021, the share of IaaS in the global public cloud market will still account for 22%, and the market size will reach 91.35 billion US dollars, a year-on-year increase of 35.6%, which is the growth rate excluding PaaS. The fastest cloud services segment.
But the embarrassing thing is that in this cloud infrastructure market, due to the needs of the layout strategy and the lag in the timing of entry, Google Cloud has fallen behind the industry leader, Amazon AWS, which has a first-mover advantage in both input and output. More than one position. According to Gartner, by 2021, Amazon AWS will occupy 38.9% of the global IaaS market share, followed by Microsoft Azure with 21.1% market share, while Google Cloud is only 7.1%, behind Alibaba Cloud’s 9.5% .
In this situation, Google Cloud has lost not only the opportunity to occupy market share, but also a valuable way to extend to customers’ PaaS and SaaS market demands.
Similarly, in the fields of PaaS and SaaS, which Google’s cloud strategy attaches great importance to, they also face strong opponents whose products and markets overlap heavily.
Microsoft has just released its Q4 financial report for fiscal year 2022. The revenue of the intelligent cloud business was US$20.909 billion, which was slightly lower than the US$21.07 billion expected by analysts, but still a year-on-year increase of 20%. From the perspective of Microsoft’s business direction, server products such as Azure public cloud, GitHub and Windows server are the core drivers of Microsoft’s revenue.
As of 2021, although Microsoft has only a 21.1% market share in the IaaS public cloud market, it is significantly lower than the 38.9% market share of its competitor Amazon AWS. However, in the field of SaaS and PaaS, Microsoft is rapidly bridging the gap with Amazon in the IaaS market with its deep industry accumulation and product system under the operating system ecosystem.
According to the financial report data, for the whole year of 2021, the operating profit margin of Microsoft Intelligent Cloud is 14% higher than that of Amazon AWS. In terms of gross profit margin comparison, Microsoft is also ten percentage points higher than Amazon. The main reason is that Microsoft has a large number of software service products with higher brand recognition, better experience, and higher added value, so it is more competitive in terms of customer acquisition cost than other cloud service giants. Obviously, in terms of technology, Google Cloud doesn’t have a clear advantage over Microsoft’s Azure.
Similarly, at the level of market target customers, Google Cloud has always been regarded as a market barrier in the field of major political and business customers, and Microsoft also has a high degree of overlap with it.
Taking government customers as an example, according to public data collection, Microsoft Cloud has served the U.S. federal government, the U.S. Small Business Administration, the U.S. Department of Defense, the U.S. Army, and the government of Western Australia. At the enterprise customer level, US operators AT&T, Verizon, European operators Telefonica and BT, as well as national infrastructure pillar enterprises such as Japan Electric, Telstra, and Singtel are also customers of Microsoft Azure.
As the top two companies in the cloud service market, Amazon and Microsoft have achieved huge operating profits in the cloud industry with obvious Matthew effect. In contrast to the current situation of Google Cloud, despite the continuous expansion of market share, due to the fact that it is in the investment period, without the premise of diluting the cost margin of market scale, it is still difficult to find a trace of profit. And it needs to be mentioned that although Alphabet is famous for its technological innovation, in the current stage of the cloud market, it is more practical to meet customer demands than to guide the market with technology. That is to say, Google Cloud’s technology products Without breakthrough progress and broad market acceptance in a short period of time, it will become more difficult to catch up with Amazon and Microsoft, which are already profitable and growing at an equally astonishing pace in the long run.
Likewise, Google Cloud has another reality to face: that of catching up and surpassing from the Chinese tech giants. With strong market demand and technical capabilities, Alibaba, Tencent, Huawei and other companies have become closer and closer to Google Cloud in terms of market share. It is foreseeable that Internet companies that have grown up in the fertile business soil of the Asia-Pacific field are Google Cloud’s unavoidable opponents.
Although the market has always had expectations for Google Cloud, under the reality that the living space is being squeezed, the company needs to dodge the thorns all around with a more rapid and correct attitude.
(Disclaimer: This article only represents the author’s point of view and does not represent the position of Sina.com.)
This article is reproduced from: http://finance.sina.com.cn/tech/csj/2022-08-02/doc-imizirav6414852.shtml
This site is for inclusion only, and the copyright belongs to the original author.