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Google parent Alphabet hit by advertising slump as sales miss estimates, but cloud losses narrow

  • Alphabet had $57.27 billion in third quarter sales, less than expected, as a slowdown in online advertising spreads from social media to search
  • One bright spot is Google’s cloud service, which trails Amazon and Microsoft, with losses less than expected at US$699 million

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Letters spell the word “Alphabet” as they are seen on a computer screen with a Google search page in this photo illustration taken on August 11, 2015. Photo: Reuters
Bloomberg
After reporting earnings and revenue that missed expectations, Google parent Alphabet Inc said on Tuesday it would slow hiring and control expenses, signalling that it was girding for tough times ahead as the economy falters.
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Google’s advertising juggernaut, which had largely dodged the digital-ad slowdown that hit rivals earlier this year, is no longer immune. Alphabet said third-quarter sales, excluding payments to distribution partners, were US$57.27 billion. That compared with the average analyst projection for US$58.18 billion.

Net income was US$1.06 per share, less than Wall Street’s estimates for US$1.25 per share. Shares fell more than 6 per cent in post-market trading.

As spiralling inflation crimps growth in digital advertising, Google and competitors such as Meta Platforms Inc’s Facebook and Snap Inc’s Snapchat are fighting for smaller budgets. Last week, Snap reported its slowest quarterly sales growth ever, which sent its stock plunging and dragged down Alphabet’s shares too. Google’s search business, which is more insulated from economic swings than social media ads, has begun to show signs of weakness.

Alphabet chief executive officer Sundar Pichai said the company was “focused on moderating operating expense growth”. Chief financial officer Ruth Porat, meanwhile, said she expected headcount additions to fall by more than half in the fourth quarter compared with the previous period.

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“As we plan for 2023, we’ll continue to make important trade-offs where needed,” Pichai said. “Throughout Google’s history, periods of dedicated focus have enabled us to emerge strongly.”

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