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Due to unexpectedly strong Pixel sales, Google will prioritise hardware in 2023

Recently, Alphabet, the parent company of Google, conducted its quarterly results call, and much like the rest of the technology sector, it did not have a very successful end to 2022. The company’s consumer-focused businesses, like YouTube Shorts, YouTube Music, and the Pixel range of smartphones, headphones, and smartwatches, all performed well, so not everything was doom and gloom.

Operating income in the fourth quarter of 2022 was $18.1 billion, down 17% from the same period in 2021, the report said. Compared to the same period a year ago, net income was down 34%, from $20.6 billion to $13.6 billion. For the entire fiscal year of 2022, the numbers were somewhat less dismal, with operating income decreasing from $78.7 billion in 2021 to $74.8 billion in 2022 (-5%), and net income falling from $76 billion to $60 billion (-21%). Revenues climbed by 1% year over year to $76 billion, which belies the fact that higher operational expenses were the principal cause of the quarter’s decline.

The year 2022 was a banner year for Google’s Pixel series. Alphabet CEO Sundar Pichai claims that the Pixel 6a, 7, and 7 Pro of 2022 are the company’s “best-selling generation of phones.” Google Pixels “gained share in every market” this year, Pichai went on to say. CEO of the firm had this to say when asked about the expansion of the premium smartphone line:

Extremely happy with Pixel’s performance in such a tough macro setting. Please hear me out on this; I consider our computing portfolio crucial. It’s the fuel that keeps the engine of invention revved up and enables us to keep investing.

When asked about Google’s intentions for 2023, Alphabet CFO Ruth Porat said, “We continue to make substantial investments, notably to support innovation across our Pixel family, while trying to create better focus and cost efficiency across the portfolio.” In agreement, Pichai said, “We are aiming to enhance the economics and hardware as we concentrate more intensely on the Pixel series and our entire cost structure there.”

In addition to the success of the Pixel phones, Google’s Pixel Watch seems to be making a positive impression as a representative of WearOS and the company’s expanding hardware ecosystem. Pichai claims that today’s consumers are considering their whole digital lives rather than just their phones. For instance, we’ve worked closely with Samsung on wearables by developing Pixel Watch and, as part of that, bringing Fitbit into our ecosystem. The combination is responsible for the 300% growth in activity throughout the Android Wear platform.

For example, Pichai said that YouTube Shorts have grown from attracting 30 billion views in 2021 to over 50 billion per day. The combined subscriber base for YouTube Music and YouTube Premium hit an all-time high of 80 million when free trial users were included. In light of these results, Alphabet said that it will devote more resources to the large-screen format with offerings like YouTube TV and YouTube Primetime, and boost its emphasis on YouTube Shorts. The corporation said that it will allocate more resources toward expanding its YouTube subscription services.

In response to the success of ChatGPT and the strain of competition, Google is likewise gearing up for a major year with its AI technologies. Pichai has said that in the next months, Google will release some of its more advanced AI models to the public, beginning with the conversational LaMDA and maybe continuing with the more mathematical PaLM. This corresponds with the rumour that the firm has been trying out Apprentice Bard, a ChatGPT alternative, as a counter to Google Search.

These figures follow on the heels of Alphabet’s third quarter 2022 earnings announcement, which showed increasing sales year over year but a decrease in operating profits. Meanwhile, Q1 2022 profits were considered to be more strong when compared to the previous year, while Q2 2022 financials showed small YoY gains across the board. There has been a clear decline over the last four reports, but Alphabet is optimistic that their investment on these more recent successes will pay off by the year 2023.