Google may be a giant in the world of digital advertising, but it’s still not immune to the impact economic downturn and recession fears are having on the online advertising market.
Alphabet, the parent company of Google, released third-quarter earnings results on Tuesday, largely due to a sharp slowdown in growth in its core advertising business, with both revenue and earnings outperforming Wall Street analysts. Below expectations on the list.
Revenue was approximately $69.1 billion, up just 6% from the year-ago quarter. Google’s advertising revenue grew just 2.5% year-over-year, compared to 43% growth in the same period last year. YouTube’s ad business, which competes with TikTok, was particularly hard hit, with revenue down nearly 2% from the same period last year.
Meanwhile, Google’s net profit of $13.9 billion was down more than 26% year-on-year, well below analyst estimates of $16.6 billion.
The company’s shares fell 6% in after-hours trading on Tuesday following the news.
Alphabet and Google CEO Sundar Pichai nodded at the tougher economic climate in a statement accompanying the results.
Pichai said, “We’re sharpening our focus on a clear set of product and business priorities. We are focused on both investing responsibly for the long term and being responsive to the economic environment.”
Tech companies, including Google, report that they are starting to feel the effects of last quarter’s decline in online ad spending. High inflation, fears of a looming recession and the ongoing civil war in Ukraine continue to weigh on the industry.
The growth of other Google businesses also appears to be slowing. Google Cloud revenue increased 37% year-over-year, slowing from nearly 45% in the year-ago quarter. The segment’s net loss increased to $699 million from $644 million in the same period last year.
Net losses in Google’s other betting segment, which includes initiatives such as Waymo’s self-driving car division, also accelerated to $1.6 billion year-over-year in the quarter.
Jesse Cohen, Investing.com Senior Analyst said, “Google delivered a disappointing quarter with the search giant underperforming our expectations across almost all business units, most importantly its core ad search segment.”
In a conference call with analysts on Tuesday, Pichai said the company has begun “refocusing resources to invest in its greatest growth opportunities.”
While adding that the company plans to cut back on headcount additions during the final three months of the year, Pichal said, “Over the past quarter, we have made several shifts away from lower priority efforts to fuel highest growth priorities.”
Google CFO Ruth Porat said on the company’s earnings call that strong growth in the fourth quarter of 2021 will make it difficult to compare year-over-year ad revenue growth to the current quarter, and that the stronger US dollar will become an increasing burden. said it was expected to be company performance. The company has not provided a detailed financial outlook for the current quarter.
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