Both Google and Microsoft reported Q1 2023 earnings last night, and so far, Wall Street seems to be happy with the results. But if you look, Google’s ad revenues were flat (slightly down) year-over-year, while Microsoft Bing Ads revenues were up 10% year-over-year. Let’s dig into the search ad revenue side for both as best as I can.
Google Ad Revenue Change
The good news is that while Google’s ad revenue was down 3.6% last quarter it was flat or only down 0.21% this quarter. This showed that Google’s advertising revenue held up and that beat Wall Street estimates.
Overall revenue was up 3% year-over-year and profit was down about 8.5%.
Here is a chart plotting Google’s overall revenue, then ad revenue and then profit over the past several quarters:
Here is the snippet from the earnings report:
Sundar Pichai, CEO of Alphabet and Google, said: “We are pleased with our business performance in the first quarter, with Search performing well and momentum in Cloud. We introduced important product updates anchored in deep computer science and AI. Our North Star is providing the most helpful answers for our users, and we see huge opportunities ahead, continuing our long track record of innovation.”
Ruth Porat, CFO of Alphabet and Google, said: “Resilience in Search and momentum in Cloud resulted in Q1 consolidated revenues of $69.8 billion, up 3% year over year, or up 6% in constant currency. We remain committed to delivering long-term growth and creating capacity to invest in our most compelling growth areas by re-engineering our cost base.”
Microsoft Bing Ad Revenue Change
Microsoft reports on this differently, but Microsoft said its search and news advertising revenue, excluding traffic acquisition costs, increased 10% (up 13% in constant currency). The good news is there is growth there, and the bad news is the growth is not increasing; it is flatlining. Last quarter, Microsoft showed 10% growth as well.
Here is a chart that helps you visualize this:
The thing is, if you look at the 10Q on page 30 as Chris Elwell noted, the increase is only 3.4%. 10% without traffic acquisition costs and then 3.4% with TAC included in the costs.
“The world’s most advanced AI models are coming together with the world’s most universal user interface – natural language – to create a new era of computing,” said Satya Nadella, chairman and chief executive officer of Microsoft. “Across the Microsoft Cloud, we are the platform of choice to help customers get the most value out of their digital spend and innovate for this next generation of AI.”
“Focused execution by our sales teams and partners in this dynamic environment resulted in Microsoft Cloud revenue of $28.5 billion, up 22% (up 25% in constant currency) year-over-year,” said Amy Hood, executive vice president and chief financial officer of Microsoft.
I am excited to see how Bing Chat and Google Bard are spoken about in the next earnings call.
