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For Google and other tech titans, the rise of artificial intelligence remains a big focus for investors as the emerging technology reshapes the tech landscape, transforming the business of search, cloud and advertising, but it also comes with a cost.
Shares of Google parent Alphabet fell more than 7% on Wednesday, a day after the company reported quarterly results. Despite beating expectations on many key metrics, the company said capital spending will jump in 2024 as it continues to invest in AI to improve its services.
“We do remain very committed to investing in the AI opportunity across Google DeepMind, Google services, Google Cloud,” Ruth Porat, the tech giant’s chief financial officer, told FOX Business’ Susan Li. “Capex was up in the fourth quarter to $11 billion, and that was overwhelmingly the investment in our technical infrastructure.”
There are serious questions about how AI could impact Google’s ad business. Advertising remains a powerhouse for Alphabet, accounting for more than 50% of its total revenue. YouTube’s ad revenue grew 16% year over year, but overall ad spending has seen a pullback as advertisers rein in spending.
Alphabet’s ad revenue for the fourth quarter rose to $65.5 billion from $59 billion in the same period a year ago, just shy of analysts’ estimates, also adding to the selling pressure. Shares are marginally lower this year, compared to the Nasdaq Composite’s modest 1% gain.
However, Porat says evolving AI technology could contribute to success across Alphabet’s spectrum of services, including cloud computing, which earned its first-ever quarterly profit in 2023.
“The results reflect spreads across industry sectors; there is an increasing contribution from AI,” Porat said. “This is clearly an extraordinary time.”
Google is expected to release its most advanced generative AI model, Gemini Ultra, later this year.
Digital news startup The Messenger is shutting down after less than a year and falling well short of its highly ambitious goals.
In a memo to staff obtained by Fox News Digital, founder Jimmy Finkelstein told staffers Wednesday he was devastated, but the site had “exhausted every option available” to raise the money needed to stay afloat.
“This is truly the last thing I wanted, and I am deeply sorry,” he wrote. “The Messenger started with an incredibly important mission – to deliver balanced and accurate journalism at a time when Americans’ trust in media is at a record low – and I am proud of what we achieved.”
According to multiple reports, Messenger staffers will not get severance packages, and reporters wrote on X they were kicked out of the site’s Slack in the middle of a workday. Finkelstein, who previously ran such outlets as The Hill and The Hollywood Reporter, told the staff, “as a new company, we encountered even more significant challenges than others and could not survive those headwinds.”
Billing itself as a “new kind of news,” The Messenger hired hundreds of journalists last year at higher-than-average salaries. It pitched itself as a centrist juggernaut that would appeal to readers tired of partisan news coverage on politics, entertainment and sports.
Under Finkelstein, it raised $50 million from various investors before launching last May, opened offices in New York, Washington and Los Angeles – three of the most expensive cities in the country – and set a goal of having a newsroom of 550 journalists by 2024. Executives told the New York Times they hoped to generate $100 million in revenue by the end of the year as well, an eye-popping goal beyond the reach of even established news sites in the crowded digital space.
But it never came close to making that a reality. Throughout its eight-month run, it dealt with economic headwinds hitting other media outlets, as well as what critics said was an outdated advertising and money-making strategy, and reported editorial infighting about the site’s direction and coverage. Finkelstein touted the site doing solid traffic, but it wasn’t nearly enough to generate the revenue for a staff of its size.
One insider told Fox News Digital The Messenger was simply too ambitious from the jump.
“They should have scaled and didn’t need to hire 300 people and open three bureaus,” they said.
News outlets were withering in their assessment of the troubled site’s collapse. Axios called it “one of the biggest failures of the internet era” on Wednesday, while the New York Times called it “one of the biggest busts in the annals of online news.”
Some staffers appeared to learn the news of losing their jobs from reading about it on another site.
“All I know is that if I were to launch a media start-up I’d be sure to rent an entire floor of a downtown Manhattan skyscraper that was 9/10ths empty all day … and then fail to tell my employees they were laid off until they read about it in the New York Times,” The Messenger’s Jordan Hoffman wrote on X.
James LaPorta wrote on X he learned of being laid off from media reports and was on his way to clean out his desk in Washington.
Other staffers expressed gratitude to readers and their colleagues.
“I’ve written some difficult stories in my career, but drafting an I’ve-been-laid-off tweet has to be the hardest,” reporter Nolan D. McCaskill wrote on X. “Idk what’s next, but thank you to the readers and sources who gave The Messenger a chance — and the stellar politics team that made this worth the risk.”
According to the New York Times, The Messenger lost $38 million last year, generating a mere $3 million in revenue, and had less than $2 million cash on hand going into 2024.
The site’s failure is the latest bit of grim media industry news, with numerous other sites recently reporting layoffs going into the new year.
H&M unexpectedly announced a change of leadership on Wednesday, with company veteran Daniel Ervér taking over as CEO from Helena Helmersson as the Swedish fashion retailer‘s performance continues to lag rivals such as Inditex and Shein.
Shares in H&M dropped 12% as the company revealed sales for December and January fell by 4% compared to the previous year, a bad sign for the key Christmas shopping period.
Helmersson, who quit after four years as CEO, said the role had been “very demanding” and she did not have the energy to continue.’
Ervér, 42, has been at H&M for 18 years, most recently as head of the retailer’s core H&M brand, a role he will keep alongside the CEO job. In an interview with Reuters, the Swede said he had voiced his interest in the role in December and the board took the decision on Wednesday morning.
The world’s second-biggest listed fashion retailer after Inditex, H&M has struggled to compete with Zara and online low-priced fast fashion giant Shein, both of which have seen stronger sales growth.
“I think the market will welcome the change after digesting the numbers,” said Adil Shah, portfolio manager at Storebrand in Oslo, which holds H&M shares.
H&M has focused on profitability rather than sales volumes recently as it aims to reach a 10% operating margin this year, and cuts costs by closing stores and laying off staff.
“The 10% goal on profitability stays, we will work hard to make that goal happen,” Erver told Reuters.
H&M’s fourth-quarter operating profit margin fell to 7.2% from 7.8% in the third quarter.
Measured in local currencies, sales from Dec. 1 to Jan. 29 – the start of its fiscal first quarter – fell by 4%, compared to an increase of 5% in the same period last year. Sales over the fourth quarter had also fallen 4%, more than the market expected.
Inditex’s operating margin was 20.3% over the nine-month period to end-October. Sales grew 11.1% over that same period.
H&M’s fourth-quarter operating profit was 4.33 billion crowns ($415.4 million), up from 821 million a year earlier but below the 4.57 billion expected by analysts in an LSEG poll.
JPMorgan analysts said the results were disappointing, and that the weakness of H&M’s fourth-quarter profit “slightly reduces (the) credibility” of the 10% margin target.
Karl-Johan Persson, H&M chairman and grandson of founder Erling Persson, said the company is in a strong position with “good conditions to make further improvements” this year. The Persson family has a 51% stake in H&M.
The shares were down 12% by 1445 GMT, having gained about 29% over the last 12 months.
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