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Speaker 1: We're gonna talk about Alphabet, the parent of Google, after

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Speaker 1: the Beldic company reported quarterly revenue slightly slightly below estimates.

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Speaker 1: We're going to take a deeper dive now with men

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Speaker 1: Deep Singh. He is the senior analyst covering Alphabet for

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Speaker 1: Bloomberg Intelligence. Men Deep, help me understand this. I mean,

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Speaker 1: everybody was so concerned about the ad sales figures coming

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Speaker 1: out of Snap. I mean that was a huge debacle.

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Speaker 1: The stock was crushed and there was a knock on effect. Right,

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Speaker 1: some of the companies like Alphabet got caught up in

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Speaker 1: that downdraft. You get a number that misses and there

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Speaker 1: seems to be such a sigh of relief. Is that

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Speaker 1: really what we're dealing with? Nothing more than a sigh

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Speaker 1: of relief? I think so. The immediate reaction is it

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Speaker 1: wasn't as bad as feared. But look, I think of

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Speaker 1: what they guided to, especially on the YouTube side, points

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Speaker 1: to weakness in terms of overall ad spend, and it's

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Speaker 1: going to trickle down to Alphabet and probably met our tomorrow.

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Speaker 1: So ad spending has often it's just searches, the most

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Speaker 1: resilient part of ad spend, and that is what showed

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Speaker 1: up in Alphabet's results today and YouTube met expectations when

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Speaker 1: it came to profit share, but how has it been

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Speaker 1: managing competition from TikTok well, So the growth really slowed

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Speaker 1: sharply five percent year over year growth was a sharp deceleration,

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Speaker 1: and I think it points to one advertisers pulling back

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Speaker 1: on the ad spend on YouTube as they have done

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Speaker 1: on other platforms, but also impressions growth, which is the

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Speaker 1: other big driver of ad spend, that seems to have slowed.

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Speaker 1: So that is a function of how well TikTok has done.

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Speaker 1: And really TikTok has taken share from all the competing

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Speaker 1: video platforms at this point of time, so it's showing up.

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Speaker 1: And I mean TikTok is in a public company, but

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Speaker 1: I would say they have the best impressions growth and

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Speaker 1: time spent on the platform. Right. So guidance in this

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Speaker 1: day and age, as you know, is extremely critical. We

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Speaker 1: heard from the Microsoft folks after the bell and that

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Speaker 1: was a pretty optimistic view for f y twenty three.

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Speaker 1: What do we know about the way in which Alphabet

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Speaker 1: expects the future to play out? Well? So Alphabet talked

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Speaker 1: about sharpening the focus on making sure all their segments

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Speaker 1: can be profitable on a standalone basis. I think the

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Speaker 1: question that investors may have is Google Cloud, which is

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Speaker 1: a twenty five billion dollar revenue run right business, is

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Speaker 1: still losing about eight million dollars a quarter. And when

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Speaker 1: you compare Google Cloud to Microsoft Azure and Amazon a

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Speaker 1: w S, both those businesses are north of in operating

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Speaker 1: margin and they are growing at a faster clip than

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Speaker 1: Google Cloud. So it makes you wonder why is Google

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Speaker 1: Cloud not profitable and what would it take to uh,

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Speaker 1: you know, make the segment profitable. I mean the head

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Speaker 1: count actually, Alphabet's headcround grew twenty are sent that's staggering.

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Speaker 1: They hired thirty thou people compared to last year and

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Speaker 1: most of them in cloud, and still the business isn't profitable.

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Speaker 1: So it makes you question the unit economics of the business.

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Speaker 1: Has that question being put in any of the analysts

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Speaker 1: calls when is the cloud going to turn a profit? Well,

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Speaker 1: so I think they were asked and they talked about

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Speaker 1: sharpening the focus and you know, making all the units profitable,

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Speaker 1: whether it's way More or Cloud. I think the question

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Speaker 1: is when, and right now, the core search business is

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Speaker 1: subsidizing all the other segments and look for a company

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Speaker 1: of Alphabet size, that's expected. We saw that with Amazon

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Speaker 1: back in the day, you know, building a WS. I

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Speaker 1: I think the fear is, uh, there isn't an end

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Speaker 1: inside in terms of the losses that Cloud is accumulating

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Speaker 1: and the other bets. Other bets segment lost one point

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Speaker 1: six billion this quarter. So just to give you the

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Speaker 1: magnitude of losses from all all these ancillary businesses they

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Speaker 1: keep piling up for Alphabet, We're going into some off

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Speaker 1: term elections. It's the silly season here, right with the

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Speaker 1: game of politics being played. Where are we when it

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Speaker 1: comes to antitrust investigations and potential UH mandates for some

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Speaker 1: type of change of behavior when it comes to some

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Speaker 1: of these big companies Alphabet included. Yeah, so you bring

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Speaker 1: up a great point. I think the cost of doing

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Speaker 1: business for Alphabet will continue to grow because of all

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Speaker 1: the regulatory focus and the focus on privacy with Apple's

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Speaker 1: you know, ad platform changes, and look, I think Alphabet

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Speaker 1: has a very tough time, you know, just migrating their

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Speaker 1: business away from all the scrutiny they draw because of

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Speaker 1: the perceived monopoly in search and all the data that

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Speaker 1: they collect, So I think overall the gross margin profile

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Speaker 1: of the business will come down because they have to

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Speaker 1: spend a lot more on convincing the regular eaders that

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Speaker 1: they're not doing anything bad when it comes to, you know,

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Speaker 1: all the consumer data that they're dealing with very quickly.

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Speaker 1: Man Deep, Alphabets sitting on a hundred and twenty four

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Speaker 1: billion dollar cash pile. What's that going to be used for? Yes,

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Speaker 1: so that's the silver lining. They talked about the seventy

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Speaker 1: billion dollar buy back authorization for this year, and they

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Speaker 1: have been aggressive with bye backs, so you could expect

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Speaker 1: them deploy a lot of that cash for buy backs,

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Speaker 1: but they clearly can't make any new acquisitions right now

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Speaker 1: with this regulatory environment. Yeah, when we talk to you

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Speaker 1: next time, maybe we can take a deeper dive into

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Speaker 1: the investment in R and D and what may lie

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Speaker 1: on the horizon for Alphabet, the parent of Google. Man Deep,

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Speaker 1: always a pleasure. Thank you so much for being with us,

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Speaker 1: Senior analyst, Man Deep saying, working for us here at

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Speaker 1: Bloomberg Intelligence