Alphabet earnings show slowing sales growth on Digital-Ad Tumult 2022-04-26 18:13:00

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Google Parent

the alphabet company

The Google -3.04%

It reported slower sales growth as global economic turmoil disrupted spending on digital advertising.

The company said first-quarter sales were up 23% from the same period last year, the lowest rate for the tech giant since late 2020. Meanwhile, the company has seen a period of explosive sales growth, as companies small and large alike flock to the market. The advertisement seeks to win over customers who spent the initial period of the pandemic confined to their homes. The company’s sales rose 41% last year.

High inflation, supply chain disruptions, Russia’s war on Ukraine Other factors affected the economic outlook, and analysts say companies’ appetite for advertising spending.

Explode, Explode company

He said last week that These pressures affected its financial results In the last quarter and may affect the advertising market in the future.

Chief Financial Officer Ruth Porat said in an earnings call that Russia’s attack on its neighbor, which began in the first quarter, had a “tremendous impact on YouTube ads compared to the rest of Google.” It said this came from the suspension of the vast majority of commercial activities in the region, as well as an associated decrease in spending mainly by brand advertisers in Europe.

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Alphabet suspended some activities in Russia in the name of The Kremlin targeted Western companies That limited some local broadcasters linked to the government.

Google’s search ads, which are often more closely related to customers’ specific buying decisions than to broader brand awareness campaigns, were less affected by broader economic concerns. a travel recovery Analysts said the continued easing of pandemic restrictions helped boost the company’s revenue growth.

“People seem to be back on the move,” said Philip Schindler, Google’s chief business officer. He said travel searches this quarter were higher than what the company saw in the first quarter of the pre-pandemic period of 2019.

Alphabet reported $68 billion in sales for the first three months, meeting Wall Street expectations. Net income, weighed down by accounting factors associated with some investments, fell 8.3% to $16.4 billion, below the estimates of analysts surveyed by FactSet.

Shares in the company closed down more than 3% on Tuesday and fell further after the results.

Ms Porat said some of the issues that affected first-quarter results, including last year’s super-growth numbers and the suspension of activities in Russia, will persist into the current quarter.

YouTube, the largest online video destination, Felt some sting from the ad market turmoil. It contributed $6.87 billion in first-quarter sales, less than Wall Street expectations of about $600 million. Alphabet is ramping up spending on YouTube to maintain its leadership in video by funding a TikTok alternative, YouTube Short, and adding Direct Shopping.

CEO Sundar Pichai said the shorts feature has grown to more than 30 billion views per day, or four times the number a year ago. The company’s focus was on feature development and rollout. It is expected that the money will come from it later.

Alphabet reports significant growth in its cloud computing business, as it tries to catch up

Amazon.

com Inc. And

Microsoft corp.

The cloud business remains a huge investment area for the company, and Google’s cloud services remain unprofitable.

Last month, Alphabet said that Plans to spend nearly $5.4 billion To buy a cyber security company

Mandiant company

To better automate cyber defenses by injecting specialized intelligence into one of the world’s largest platforms of cloud-based tools.

Cyber ​​security investments have become Something out of an arms race Among cloud service providers, with a series of ransomware and other attacks raising customer concerns about data security. Microsoft and that too reported quarterly earnings On Tuesday, he said revenue and profits rose as demand for its cloud services and software products continued to rise, with the pandemic spurring more remote work.

Google Cloud sales increased 44% year over year to $5.8 billion, resulting in an operating loss of $931 million. In its earnings, Microsoft said sales of Azure and its other cloud services advanced 46% compared to the same quarter last year. Amazon announces quarterly results Thursday.

Alphabet also said it will buy back up to an additional $70 billion of some of its shares.

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write to Megan Bobrowski AT Meghan.Bobrowsky@wsj.com

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