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Google-Parent Alphabet’s Profit Slips As Growth Slows

Channels Television  
Updated July 27, 2022
Google on Friday, January 14, agreed to buy a central London building complex for $1 billion, but stressed it remained committed to new hybrid working patterns in the wake of Covid.
Ben STANSALL / AFP

 

 

Google-parent Alphabet reported Tuesday its profit and revenue slipped as the internet giant’s long sizzling ad revenue growth cooled, but the market seemed relieved the news wasn’t worse.

Big tech firms are grappling with multiple problems, from inflation to the war in Ukraine, and results in general for the quarter have not been great so far.

Alphabet’s revenue in the latest quarter grew 13 percent to $69.7 billion, with its global search and cloud computing services bringing in most of the money — but this was under analysts’ expectations.

“I think it’s a good time to sharpen our focus,” Alphabet chief executive Sundar Pichai told an earnings call. “It’s a chance to digest and make sure we are working on the right things.”

Net income at Alphabet fell 13 percent year-over-year to $16 billion in the latest quarter, but the flow of online ad dollars that fuels the company’s fortunes has slowed as inflation, war and other troubles vex the overall economy.

“Google’s earnings miss this quarter proves it’s not immune to the challenges facing the digital advertising industry at large,” said analyst Evelyn Mitchell.

“Still, with its tremendous market share in search advertising, Google is relatively well positioned to weather the rough waters that lie ahead,” she added.

The internet giant’s stock was up about 4.5 percent in after-hours trading, as the market appeared relieved by the results.

– Slowing hiring –
Google was also paying more to acquire online “traffic” from which it makes money, the earnings report showed.

Meanwhile, revenue from ads on video-sharing platform YouTube was up only slightly in the quarter. Google has looked to YouTube as a source of growth as people spend growing amounts of time looking at online videos.

“In the second quarter our performance was driven by Search and Cloud,” Pichai said.

Earnings season has gotten off to a rough start with less than stellar news from both Netflix and Snapchat’s parent firm, a decidedly different world than seen during the pandemic surge.

Netflix reported last week losing subscribers for the second quarter in a row as the streaming giant battles fierce competition and viewer belt tightening, but the company assured investors of better days ahead.

The loss of 970,000 paying customers in the most recent quarter was not as big as expected, and left Netflix with just shy of 221 million subscribers.

The company said in its earnings report that it had expected to gain a million paid subscribers in the current quarter.

At the same time, Snapchat’s owner announced plans last week to “substantially” slow recruitment after bleak results wiped some 30 percent off the stock price of the tech firm, which is facing difficulties on several fronts.

Snap reported that its loss in the recently ended quarter nearly tripled to $422 million despite revenue increasing 13 percent under conditions “more challenging” than expected.

In addition to current troubling economic conditions, analysts pointed to longer term issues for Google.

“The revenue is showcasing that they are reaching near saturation of their market,” said analyst Rob Enderle. “Their opportunity to grow is going to decrease over time.”

According to Insider Intelligence, Google is expected to reap nearly $175 billion in net ad revenue in 2022, or 29 percent of the global digital ad pie.

Alphabet, with more than 174,000 employees worldwide, has recruited throughout the pandemic, but it recently announced a slowdown in hiring for the rest of the year.

“Although we expect the pace of headcount growth to moderate next year, we will continue hiring for critical roles, particularly focused on top engineering and technical talent,” said chief financial officer Ruth Porat.

Many other tech companies have decided to lay off staff, including Netflix and Twitter, or slow the pace of hiring, such as Microsoft and Snap.