Alphabet revenue drops as YouTube revenue disappoints

Alphabet’s profits fell $1.5 billion in the first quarter from a year ago, with weak results from its YouTube division underscoring the slowdown in online advertising.

YouTube revenue rose 14% to $6.9 billion, below the $7.5 billion expected by analysts polled by Refinitiv, although Alphabet chief executive Sundar Pichai said said more than 2 billion monthly YouTube users were spending more time on the platform “even as people moved back inside”. person’s activities.

Alphabet’s chief financial officer, Ruth Porat, said YouTube’s revenue deceleration was partly the result of Russia’s invasion of Ukraine, which had repercussions across Europe.

“The war had an outsized impact on YouTube ads compared to the rest of Google,” she said. “It was both from the suspension of the vast majority of our business activities in Russia and the . . . related reduction in spending primarily by brand advertisers in Europe.”

Shares of Google’s parent company fell more than 5% in after-hours trading after Alphabet reported a 23% increase in revenue in the three months to late March to $68 billion billion, slightly below the forecast of $68.1 billion. A year earlier, revenues had increased by 34%. Net profit fell 8% from a year ago to $16.4 billion.

The overall results, slightly disappointing compared to analysts’ expectations, come as investors reassess lofty valuations for tech stocks amid fears of soaring inflation, monetary policy tightening and heightened geopolitical tensions. by Russia’s invasion of Ukraine. The tech-heavy Nasdaq stock index has lost a fifth of its value this year, while the S&P 500 is down less than 13%.

Porat also warned that the current quarter will be even more difficult due to currency headwinds and the almost complete shutdown of Google’s operations in Russia, which accounted for 1% of revenue in 2021.

Porat told analysts the second quarter came up against an “unusually strong” period a year ago, when results were flattered by comparisons with “Covid-related weakness” in 2020.

Traffic acquisition costs, a metric reflecting how much Google has to spend to acquire web visits, jumped 23% to $11.99 billion, from the $11.7 billion analysts expected, according to FactSet.

Google Search revenue, which accounted for 58% of total revenue, rose 24% from a year ago to $39.6 billion.

Commercial Director Philipp Schindler said the search activity benefited people looking for beaches, rental units and flight deals. Overall, travel searches have already surpassed pre-pandemic levels, he said.

Google Cloud’s revenue rose 44% to $5.8 billion, in line with forecasts, although below the 46% growth recorded by Azure, Microsoft’s rival cloud group.

The cloud unit posted an operating loss of $931 million, but executives said they would invest aggressively in the region, citing a “significant market opportunity” over the long term.

Pichai called the search and cloud results “strong” and said they reflect how people and businesses are both experiencing digital transformation. “We will continue to invest in quality products and services and create opportunities for partners and local communities around the world,” he said.

Porat said YouTube “is seeing a slight headwind to revenue growth” as viewership for Shorts — an ad-free TikTok rival for 60-second videos — “grows as a percentage of total time on YouTube.”

Alphabet is testing how to monetize the platform, but executives said they were confident in its future, pointing out that Shorts’ viewership had quadrupled over the past year to 30 billion daily views.

Alphabet added 7,400 people to its workforce in the first quarter as its cloud unit grew aggressively. Porat said hiring was “the main driver” of a 24% increase in operating expenses from a year ago to $18.3 billion.

Alphabet’s board also announced a $70 billion share buyback plan, having spent $52 billion on shares in 2021.

Comments are closed.