Google-parent Alphabet misses on revenue and profits as growth slows
YouTube business saw the biggest slowdown, with revenues increasing just 5% compared with 84% during the same time last year
Alphabet, the parent company of Google, reported Tuesday that both its profit and revenue slipped during the second quarter of 2022, although its stocks rose in after-hours trading, as market was relieved that the news wasn't worse.
The year has started off with tech stocks taking a beating amid troubling economic indicators. Inflation and the Ukraine war are two of the major issues that big tech firms have been battling, and so far, the quarterly results haven't been very encouraging.
In Q2'22, Alphabet's total revenue increased 13% to $69.7 billion, with its global search and cloud computing services bringing in the majority of the money, although this fell short of analysts' expectations.
In the same period last year, revenue growth was 62%, when the company benefited from the post-pandemic reopening and an uptick in consumer spending.
The net income for Q2'22 was $16 billion, which is less than the $18.5 billion that was reported for the same period a year ago. Google attributed a part of the decline to expenditure on data centres, which the company said had been difficult to carry out in earlier quarters owing to problems connected to COVID.
Advertising revenue was up 12%, reaching a total of $56.3 billion, as marketers reduced their expenditure to better manage the effects of inflationary pressures.
Revenue from Google Search and related activities increased to $40.6 million, from $35.8 million a year ago. Travel and shopping-related queries contributed to this growth, according to Philipp Schindler, Google's chief business officer.
While it fell short of sales forecasts, Google Cloud generated $6.3 million, a 35% y-o-y increase compared to Q2 2021's $4.6 billion in revenue.
The Cloud division's quarterly loss of $858 million was a 45% increase over the $591 million deficit from the previous year.
In the company's earnings webcast, Alphabet CEO Sundar Pichai said that the market "still feels like early phases" of the cloud transformation, giving Google Cloud a substantial market potential.
"We are constantly in conversations with customers, big and small, who are just undertaking the journey," he said.
Alphabet CFO Ruth Porat said the company is investing to support the long-term growth and looking at the path to profitability.
The YouTube business had the biggest slowdown, with revenues increasing just 5% to $7.4 billion after increasing 84% during the same time last year. Considering that more and more people are spending time watching internet videos, Google has turned to YouTube as a source of growth.
Although Alphabet didn't disclose a sales projection, Refinitiv reports that analysts anticipate growth of 14% to $293.9 billion this year.
"I think it's a good time to sharpen our focus," Pichai said.
"It's a chance to digest and make sure we are working on the right things."
Despite recruiting throughout the epidemic, Alphabet, which has more than 174,000 workers globally, recently announced a slowdown in hiring for the remainder 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 Porat.