Dive Brief:
- Alphabet’s newly-minted CFO Anat Ashkenazi will keep her eye on reducing costs as the Google parent continues to target growth in the burgeoning generative AI space, she said Tuesday following the release of its Q3 earnings.
- One of her “key priorities” as finance chief is to “look across the organization to see what we can do in terms of driving further efficiencies,” Ashkenazi said during her first earnings call as CFO of the Mountain View, California-based company. “There's really good work that was started by Ruth [Porat], Sundar [Pichai] and the rest of the lead team to reengineer the cost base. But I think any organization can always push a little further.”
- For the quarter ended Sept. 30, Alphabet reported revenues from its cloud segment — including its Google Cloud platform and generative AI solutions — jumped 35% to reach $11.4 billion, according to its earnings results citing year-over-year growth. Revenues overall rose by 15% year-over-year to reach $88.3 billion, the company said.
Dive Insight:
An alum of pharmaceutical company Eli Lilly, Ashkenazi joined Alphabet as its CFO in July after the tech giant announced its long-serving finance chief Ruth Porat would move into the new role of president and chief investment officer. Ashkenazi received a $9.9 million sign-on bonus upon joining the company, CFO Dive previously reported.
Ashkenazi’s focus on improving costs comes as the company continues to invest heavily in generative AI technologies, leading to concerns regarding its margins and spending. Rising demand in the company’s cloud business creates the opportunity both for margin expansion and short-term revenue generation, Ashkenazi said. However, that means there are also “headwinds associated with the — overall, the annual run rate or costs associated with these investments” whether related to depreciation or construction costs, she said.
The company will “continue to drive efficiency in the business to try and offset some of these. But this is how I'm thinking about the dynamics for cloud,” she said.
The move to pare down costs by Alphabet’s new CFO comes after Ashkenazi’s predecessor Porat highlighted concerns over the company’s capital expenditures in Alphabet’s Q2, her final quarter as CFO, causing shares to slump as investors remain focused on the growing generative AI space.
Porat warned in July that Alphabet’s Q3 could be impacted by depreciation and higher expenses related to its AI investments, CFO Dive reported at the time. For its Q2, Alphabet reported capital expenditures of $13 billion, Porat said, with spending expected to reach $12 billion quarterly for the rest of the year.
The company’s Q3 capex also hit $13 billion, Ashkenazi said during the earnings call, with much of that spending coming from investments in “technical infrastructure,” including servers, data centers and related equipment.
“We will be investing in Q4 at approximately the same level of what we've invested in Q3, approximately $13 billion,” she said.
Such investments leave Alphabet “uniquely positioned to lead in the era of AI because of our differentiated full stack approach to AI innovation,” CEO Pichai said Tuesday. Its “continued focus” on efficiency has also led to an improvement in margins, he said in a statement included in the earnings report, with operating margin reaching 32% compared to 28% for the prior year period.
In addition to impacting its costs, the company’s continued bet on GenAI has also led to sweeping changes at the executive leadership level, according to an August CNBC report.
Porat’s move to her newly established role followed after several long-time Google employees, including long-time Google alum Urs Hölzle, departed the company earlier in the year, while Google promoted the CEO of its subsidiary DeepMind, Demis Hassabis, to take point on AI for the organization with the role of chief scientist in April, according to CNBC.
