Alphabet reported flat revenue in Q4 2022 as Google’s advertising business slowed, while CEO Sundar Pichai indicated a bigger focus on AI services going forward in light of increased competition from rival Microsoft.

Net income fell from $20.6 billion in Q4 2021 to $13.6 billion, with revenue up 1 per cent to $76 billion, figures largely attributed to a 4 per cent decline in advertising sales to $59 billion.

Pichai stated the advertising decline was due to more modest spending from bigger customers in response to the current economic situation, along with the impact of foreign exchange.

YouTube revenue fell 8 per cent to $8 billion and its Google Network unit declined from $9.3 billion to $8.4 billion.

Google Cloud revenue rose 32 per cent to $7.3 billion and Other Bets increased from $181 million to $226 million.

In line with a recent plan to cut 12,000 jobs, the company expects to incur costs of $1.9 billion to $2.3 billion during the current quarter, along with $500 million from reducing office space.

Pichai stated the company is on “an important journey to reengineer our cost structure in a durable way”.

Alphabet placed a big focus on AI technology, as it faces up to an increased presence in the segment from Microsoft following its multi-billion dollar investment in OpenAI, developer of generative AI app ChatGPT.

Pichai stated Alphabet’s long-term investments in deep computer science made it “extremely well-positioned as AI reaches an inflection point”.

He also teased plans to unveil “AI-driven leaps” in search and beyond.

CFO Ruth Porat revealed its AI research arm DeepMind would be taken out of its Other Bets division and reported under direct corporate expenses going forward, a move to integrate the unit with the wider Alphabet business.