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Alphabet (Google) sees second-quarter growth slow and net profit of $16 billion

Google parent Alphabet’s net profit fell 13% year over year to $16 billion in the second quarter as advertising budgets tightened due to the economic crisis.

In the period from April to June, the Californian group achieved a turnover of 69.7 billion dollars, increasing by 13 percent. This is the weakest annual revenue growth since the second quarter of 2020, when advertisers, particularly tour operators, suddenly closed the floodgates at the start of the pandemic. Without the adverse impact of exchange rates, the company would have recorded 16% growth.

Alphabet CEO Sundar Pichai said search engine ad revenue and cloud operations (remote computing) drove the group’s growth, with revenue of $40.7 billion and $6.3 billion, respectively. YouTube earned 7.3 billion, up just 4.8 percent year-over-year.

The company’s shares were up about 1% in electronic trading after the close on Wall Street. The market expected the results from the global online advertising leader to be a barometer of sorts for the industry, especially after results from Snap and Twitter last week. The parent company of the Snapchat app fell 40% after its financial performance was seen as disappointing despite a notable increase in the number of users. Twitter, in turn, noted:headwindsin the sector, which contributed to the net loss of the previous quarter.

Google was flat this quarterunfavorable year-over-year comparisons, disruption to its operations in Russia and macroeconomic conditions that are sharply reducing advertising budgets;“, – noted Evelyn Mitchell, from the company Insider Intelligence. Rampant inflation, rising interest rates and supply chain challenges are forcing many companies to reduce their marketing budgets.

Layoffs and reduced recruitment

More worryingly for Alphabet, Meta (Facebook, Instagram) and Amazon, the habits adopted by consumers during the pandemic seem less entrenched than the market thought. Online sales platform Shopify announced on Tuesday that it is laying off 10% of its employees (about 1,000 people). Because even if the share of e-commerce has performed well, it has returned to the level expected before the health crisis distorted the forecasts of the Canadian group.

Established social networks are also facing the rise of young, ultra-popular apps, starting with TikTok, which is quickly grabbing users’ attention with its short and catchy creative videos. “Competition for YouTube increased only in the second quarter as TikTok launched new products and ad formatssaid Evelyn Mitchell. “It remains to be seen whether Google’s massive investment in YouTube Shorts, a TikTok copycat format, will translate into revenue.added the analyst.

According to Insider Intelligence, Google is expected to generate about $175 billion in net advertising revenue in 2022, or 29% of global digital advertising. The American group, which has more than 174,000 employees worldwide (+21% in one year), has recruited everywhere during the pandemic, just like its West Coast neighbors. But he recently announced a hiring slowdown for the rest of the year and even suspended all new offers for two weeks.allow teams to determine their own priorities“, according to the press spokesperson. Many other tech companies have decided to cut staff (including Netflix and Twitter) or slow their hiring pace, such as Microsoft and Snap.

Source: Le Figaro

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