Second bellwether for tech sector posts its financials – Alphabet reveals disappointing ad sales, sparking fears for digital media sector
Google parent Alphabet has become the second tech giant to confirm the parlous state of the global economy with its latest financial results.
Alphabet’s profits fell during the July to September period as disappointing ad sales impacted its YouTube division, but quarterly revenues still managed to grow.
And the firm indicated that cost cutting at Google is already underway, after confirming that it plans to cut hiring in Q4 by more than half.
Shares in Alphabet fell 6.5 percent in after hours trading to below $97. Excluding this latest drop, Alphabet shares are down 28 percent over the past year.
An examination of Alphabet’s third quarter ending 30 September, we can see the firm posted a net profit that was down to $13.9bn, from $18.9bn a year earlier.
Revenue growth also slowed to 6 percent from 41 percent in the same year-ago quarter, after it posted revenues at $69bn, down from $65.1bn a year earlier.
This was also a miss on $70.58bn expected by analysts, according to Refinitiv estimates.
“We’re sharpening our focus on a clear set of product and business priorities,” explained Sundar Pichai, CEO of Alphabet and Google. “Product announcements we’ve made in just the past month alone have shown that very clearly, including significant improvements to both Search and Cloud, powered by AI, and new ways to monetize YouTube Shorts.”
“We are focused on both investing responsibly for the long term and being responsive to the economic environment,” Pichai stated.
Fiscal performance across Alphabet’s divisions was mixed.
Google search posted revenues up at $39.5bn from $37.9bn in the same year-ago quarter.
YouTube advertising dropped 2 percent to $7bn from $7.2bn a year earlier, continuing a tough year for the unit in 2022.
That $7bn was also a miss from the $7.42bn that analysts had expected.
Quarterly revenue from Google Cloud notably grew to $6.9bn from $4.9bn a year earlier.
The ‘Other Bets’ unit (which includes Waymo etc) posted revenues up at $209m from 182m a year ago.
Like other tech players, Alphabet is also undertaking cost cutting measures.
In July Sundar Pichai in an email to staff said the firm would slow the pace of hiring for the rest of the year, saying it was “not immune to economic headwinds.”
And this has been confirmed this during the earning call, when he cited the economic challenges, which includes a potential recession, soaring inflation, increased interest rates, and lower advertising spending.
Alphabet said that it has a total full-time worker headcount of 186,779 at the end of the third quarter – up from 150,028 last year.
Pichai however said that the fourth-quarter headcount additions will be “significantly lower” than the third quarter as the company becomes “focused on moderating operating expense growth.”
It was revealed that Alphabet had hired 12,700 people in the third quarter, but expects to hire less than half that number in the final quarter.