The numbers fell short of expert expectations.
(Photo: dpa)
san francisco The Google parent company Alphabet has missed the expectations of analysts, the company’s price collapsed by more than six percent in after-hours trading. Instead of the sales of $70.6 billion expected by analysts for the past quarter, Alphabet reported quarterly sales of $69.1 billion on Tuesday.
Year-on-year growth was around six percent. In the previous year, however, the increase was still 40 percent. Earnings per share of $1.06 were below the $1.25 per share analysts had expected and significantly below the prior-year figure of $1.40 per share.
The YouTube video platform has been an important source of sales and profits for the company for years. In the past quarter, the company had to report a decline in sales for YouTube for the first time. The company drove in the three-month period with 7.07 billion dollars about 1.9 percent less advertising sales than in the same period last year. Analysts, on the other hand, had expected a significant increase.
Alphabet relies heavily on advertising revenue for its business. Not only on YouTube, but also in Google Internet search and other areas, the advertising revenues for the company developed sluggishly. Alphabet reported advertising revenue of $54.48 billion — largely flat compared to the same period last year.
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Weak data is also dragging down Meta and Pinterest
Analyst Brent Thill of investment bank Jefferies blamed the strong dollar and a difficult macroeconomic environment for Google’s weak advertising business.
>> Read here: Why experts give hope after the tech crash
Alphabet’s weak numbers also dragged down shares of other tech companies that rely heavily on advertising. The Facebook group Meta and the Pinterest network lost around four percent of their stock market value after the exchange.
Meta boss Mark Zuckerberg will present quarterly figures for his company on Wednesday. Analysts fear that Meta could have been hit even worse by a difficult advertising environment. Analyst Mark Mahaney from asset manager Evercore ISI already expected a decline in Meta advertising sales of around five percent.
One of the few positive areas for Alphabet has been its cloud business. The division achieved sales of 6.9 billion dollars – more than analysts had expected and an increase of around 38 percent compared to the same period last year. However, the division is not profitable. Losses rose to $699 million in the quarter from $644 billion a year earlier.
Outlook for the coming quarter cautious
Alphabet CEO Sundar Pichai addressed the problems directly in the conference call with investors: “We will focus on a clearly defined product portfolio and business priorities.” Recent innovations have already shown this, including a new system, YouTube Monetize short videos. They aim to break the dominance of Chinese rival TikTok in this area.
In view of the global economic situation, he promised investors that they would “invest responsibly”. For example, employee growth will be “significantly lower” than in previous quarters. CFO Ruth Porat specifies that there will only be about “half” of the latest figures of over 12,000 new hires.
The Alphabet boss emphasized that the search engine business is still good.
(Photo: dpa)
The search engine business itself is “healthy,” emphasized Pichai. In particular, exchange rate effects had a negative impact on the results. Google has a strong international footprint and the strong dollar weighs on it when earnings are transferred outside of the country to the US.
Alphabet CFO Porat did not forecast an all-clear on the currency front for the current quarter either. The “headwinds” from the foreign exchange market should even increase if the dollar remains strong. As for earnings and earnings figures for the coming quarter, the chief financial officer warned that the strong performance of the fourth quarter of 2021 will make it “more difficult” to report high growth numbers this year.
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