Google’s CFO Pushes for Cost Efficiency
For nine years, the role of Chief Financial Officer (CFO) at Google and its parent company Alphabet was held by Ruth Porat. Porat took on this significant position in 2015, leaving behind a successful career on Wall Street for the bustling innovation hub of Silicon Valley. During Porat’s tenure at Alphabet, significant financial strategies and changes have shaped the company’s growth and financial health.
On Tuesday, Anat Ashkenazi made her debut on the earnings call as Porat’s successor. “Google’s CFO Pushes for Cost Efficiency” outlined one of her top priorities as driving more “cost efficiencies” across the company, continuing the efforts initiated by her predecessor and Alphabet CEO, Sundar Pichai. “There’s really good work that was done, started by Ruth, Sundar, and the rest of the lead team to re-engineer the cost base,” Ashkenazi said during the call. “But I think any organization can always push a little further, and I’ll be looking at additional opportunities.”
A New Era for Alphabet’s Financial Strategy
Ashkenazi joined Alphabet in July, nearly a year after the announcement that Porat would be transitioning to a new role as President and Chief Investment Officer. Ashkenazi’s appearance on the earnings call came following Alphabet’s report of third-quarter earnings that exceeded expectations on both the top and bottom lines, driven by robust revenue growth from the company’s search and cloud units. Alphabet shares, which have risen 21% for the year, saw an additional 5.8% increase in extended trading post-report.
Adapting to a Competitive Landscape
The company is contending with the challenge of maintaining its dominance in search advertising amidst the rising popularity of artificial intelligence upstarts like OpenAI and Perplexity. Additionally, TikTok has recently enabled brands to target ads based on search queries, and giants such as Amazon and Meta are developing their own conversational AI tools. To adapt to this evolving competitive landscape and the altered economy, Google has undertaken cost-cutting measures and initiated internal reorganizations.
Investment in Infrastructure and AI
Ashkenazi emphasized that one of her key objectives is to identify further efficiencies across the organization. This will enable the company to invest in new areas and maintain its competitive edge and profit margins. During the third quarter, Alphabet reported $13 billion in capital expenditures, and Ashkenazi indicated that the company expects this level of spending to continue into the fourth quarter. The company directed the majority of these expenditures towards technical infrastructure, including servers and data center equipment that support cloud and AI products.
Looking Ahead
The cloud sector, in particular, is a high priority that “requires investment,” Ashkenazi noted, citing the necessity to scale AI products. She also forecasted increased capital expenditures in 2025, aligning with Pichai’s aggressive roadmap for the upcoming year, particularly concerning search and cloud. Ashkenazi assured that these investments, driven by customer demand, are anticipated to generate revenue in the near term.
Balancing Investments and Cost Savings
To counterbalance these substantial investments, Ashkenazi and the leadership team remain committed to ongoing cost-cutting efforts across the company. During the Q&A segment of the call, Mark Mahaney from Evercore ISI asked, “As you’re coming in looking at this fresh, do you find it clear that there are many newfound or ongoing cost efficiencies?”
Ashkenazi highlighted that “headcount management, facilities management, and other process efficiencies” bolstered recent earnings, mentioning more opportunities for cost savings on the horizon. She identified one significant area for potential efficiencies: leveraging AI within the company’s own processes to enhance productivity and streamline operations.
Anat Ashkenazi’s debut marks a new chapter for Alphabet, with a strong focus on financial discipline and strategic investments aimed at reinforcing the company’s leadership in the tech industry. Her background, coupled with her fresh perspective, positions her to drive Alphabet’s financial strategy forward in a rapidly evolving market.
