The net income of Alphabet, the parent company of Google, fell 13% year-on-year to $16 billion in the quarter, according to a statement on Tuesday.
From April to June, the Californian group achieved a turnover of 69.7 billion dollars, an increase of 13%.
This is the weakest year-over-year revenue growth rate since the second quarter of 2020, when advertisers abruptly closed the floodgates at the start of the pandemic, particularly tour operators.
Barometer
“It’s a good time to sharpen our priorities,” Alphabet boss Sundar Pichai said in a conference call with analysts. “It’s an opportunity to digest and make sure we’re working on the right projects.”
It noted that revenue from search engine advertising and cloud (remote computing) activity had fueled the group’s growth, with revenues of $40.7 billion and $6.3 billion, respectively.
On Wall Street, the company’s share took about 4% in e-commerce after the close.
The results of the world leader in online advertising were expected by the market as a kind of barometer of the sector, especially after those of Snap and Twitter last week.
“Is not safe”
The parent company of app Snapchat plunged 40% the day after financial performance was seen as disappointing, despite a notable rise in user numbers.
Twitter, meanwhile, noted “headwinds” in the sector, which contributed to a net loss in the latest quarter.
“Investors were expecting a disaster for Alphabet, but in the end the numbers were slightly better than they feared,” said Dan Ives of Wedbush Securities.
“After the Snap debacle, the growth of advertising at Google should give the market and the tech community a bit of confidence,” the analyst said.
concerns
Google is “not immune to threats to the industry,” said Insider Intelligence’s Evelyn Mitchell.
The group faced this quarter “an unfavorable annual comparison, the paralysis of its activities in Russia and macroeconomic conditions that are drastically reducing advertising budgets,” he explained.
Rampant inflation, rising interest rates and supply chain difficulties are leading many companies to cut their marketing budgets.
Even more worrying for Alphabet, Meta (Facebook, Instagram) and Amazon, the habits adopted by consumers during the pandemic seem less entrenched than the market believed.
The online sales platform Shopify announced on Tuesday that it would lay off 10% of its employees (around 1,000 people).
Because although the share of e-commerce has progressed well, it has returned to the level expected before the health crisis distorted the Canadian group’s forecasts.
“market saturation”
Established social networks are also facing the rise of young and ultra-popular apps, starting with TikTok, which is quickly devouring users’ attention with its short, captivating videos from creators.
YouTube earned $7.3 billion, just 4.8% more year over year.
“For YouTube, the competition only increased in the second quarter as TikTok launched new products and ad formats,” said Evelyn Mitchell.
According to Insider Intelligence, Google is expected to make nearly $175 billion in net ad revenue in 2022, or 29% of the global digital ad pie.
Alphabet’s second-quarter results “show market saturation and lack of cost control coming back to haunt them,” said independent analyst Rob Enderle.
The American group, which has more than 174,000 employees worldwide (+21% in a year), hired from everywhere during the pandemic, like its neighbors on the West Coast of the United States.
But he recently announced a slowdown in hiring for the rest of the year, and even halted all new offers for two weeks, “to allow teams to determine their priorities,” according to a spokesman.
Many other tech companies have decided to lay off staff (including Netflix and Twitter) or slow the pace of hiring, including Microsoft and Snap.
Source: BFM TV
