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Wednesday, September 28, 2022

Profit at Alphabet fell by 8% in the third quarter as Google’s economic boom showed signs of waning

Alphabet, the parent company of Google, announced an 8 percent decrease in quarterly earnings on Tuesday, weighed down by sluggish growth in advertising on YouTube and search, as well as a decline in the value of its assets. Google’s parent company, Alphabet, is the world’s most valuable firm.

According to the corporation, it made a net profit of $16.44 billion in the first quarter, down from a profit of $17.93 billion in the same period the previous year — marking just the second time since the second quarter of 2020 that the company’s quarterly profit has declined from the preceding year. The company’s revenue increased by 23 percent to $68.01 billion. According to estimates published by FactSet, the company’s earnings fell short of analysts’ forecasts, which called for a net profit of $17.33 billion on sales of $68.05 billion.

Compared to a year ago, when the business witnessed a significant comeback in demand for digital advertising and achieved a $4.8 billion gain in its stock holdings, Alphabet’s earnings has decreased. A $1.07 billion loss in the value of its assets was reported by Alphabet for the first quarter of the year 2018. ADT, a building security business, and the ride-hailing service Lyft were among the companies that the corporation has disclosed it owns in the past. Both of these companies have seen their stock values decrease in tandem with the larger market.

Furthermore, growth in Google’s two primary advertising businesses has moderated compared to recent quarters. The amount of advertising on YouTube increased by 14 percent compared to the previous year. According to YouTube, the situation in Ukraine has pushed several European marketers to reduce their investment on the platform.

Search advertisements increased by 24 percent in the fourth quarter of 2021, although this was a slowdown from a 36 percent gain in the previous quarter. A high dollar, which has a negative impact on overseas sales, was also a factor in the company’s poor performance in the quarter.

Ruth Porat, Alphabet’s chief financial officer, said the company’s growth in the coming quarters may appear more modest when compared to that of last year, when the company had favourable comparisons following a slowdown in 2020 during the early stages of the pandemic. “We expect growth to be more modest in the coming quarters,” she said.

She cautioned that the current quarter of Alphabet would be tough to compare to the previous quarter. It will reflect the company’s decision to discontinue operations in Russia, which accounted for around one percent of overall sales in the previous year.

Nonetheless, Alphabet’s mixed quarter demonstrated just how much the company’s revenue grew at the height of the epidemic last year, despite the negative quarter. The revenue rise of 23 percent in the first quarter — at a time when the corporation was taking in over $750 million every day — represented a considerable deceleration from the 41 percent surge in sales seen in the previous year.

Over the course of the epidemic, Alphabet has profited from greater internet activity, which often translates into more possibilities for the firm to sell more advertising, since Google search is frequently used as an entry point to the web and YouTube is the most popular video-sharing site.

In response to Amazon’s expanding advertising business, Google has also made modifications to the way it permits shops to advertise items that are available for purchase by online buyers. Increasing the number of individuals who start their buying queries on Google rather than going straight to Amazon is the company’s ultimate objective.

The results of a recent poll conducted by Morgan Stanley revealed that the number of consumers who begin their buying searches on Google and YouTube has progressively climbed to 60 percent, up from 50 percent in 2020. Consumer shopping and travel searches were the most significant drivers to revenue growth in the first quarter, according to Google.

In spite of the fact that the company continues to run at a loss, Google’s cloud computing unit reported a 44 percent gain in sales for the quarter ended June 30. Losses decreased to $931 million in the first quarter of this year, down from $974 million in the same period last year.

Alphabet said that it was continuing its aggressive hiring. According to the corporation, it had 163,900 employees at the end of March, representing an increase of 7,500 people since the end of December.

David Faber
I am a Business Journalist of The National Era
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