SAN FRANCISCO (AFP) – Google parent Alphabet on Tuesday reported quarterly earnings that fell short of market expectations as belts tightened in the digital ad market that drives its revenue.
Alphabet said it made a profit of USD14 billion in the third quarter on ad revenue that grew just six per cent to USD69 billion when compared with the same period of last year.
Aside from one period at the start of the COVID pandemic, that would mark the weakest revenue growth at Alphabet for any quarter since 2014.
“When Google stumbles, it’s a bad omen for digital advertising at large,” said Insider Intelligence analyst Evelyn Mitchell.
“This disappointing quarter for Google signifies hard times ahead if market conditions continue to deteriorate.”
Alphabet shares slipped 6.8 per cent to USD97.35 in after-market trades that followed the release of the earnings report.
Google’s foundation in advertising on its heavily used search engine does give it an advantage, however, over other ad-reliant tech firms such as Meta, Snap and Twitter, the analyst added.
“Over time, we’ve had periods of extraordinary growth and then there are periods I viewed as a moment where you take the time to optimise the company to make sure we are set up for the next decade of growth ahead,” Alphabet and Google chief Sundar Pichai said on an earnings call.
“I view this as one of those moments.”
Alphabet chief financial officer Ruth Porat said the financial results in the quarter showed “healthy fundamental growth in Search and momentum in Cloud” computing revenue, but suffered from foreign exchange rates given the strong United States (US) dollar.
“We’re working to realign resources to fuel our highest growth priorities,” Porat said.
Big tech firms are grappling with multiple challenges, from inflation to the war in Ukraine, putting pressure on earnings.
Alphabet recruited throughout the pandemic, but announced a slowdown in hiring as ad revenue growth cooled this year.
“Within this slower headcount growth next year we will continue hiring for critical roles, particularly focused on top engineering and technical talent,” Porat said.