SAN FRANCISCO – Alphabet on Thursday fell short of Wall Street expectations for fourth-quarter profit and revenue, and chief executive Sundar Pichai said Google’s digital advertisement clients pulled back spending more in the period than in the preceding quarter.
Shares of Alphabet were down nearly 5 per cent in after-hours trading, after losing about 40 per cent of their value in 2022.
“Despite being seen as one of the most insulated companies in the advertising space relative to peers, Alphabet’s poor quarter is the latest sign that worsening fundamentals and a tough macroeconomic environment are prompting advertisers to cut back on spending,” said Mr Jesse Cohen, senior analyst at Investing.com.
Shares of other technology companies Apple and Amazon also fell after they posted disappointing results on Thursday, wiping off gains after Facebook parent Meta Platforms on Wednesday boosted tech shares with news of cost cuts and a large buyback.
Alphabet will “meaningfully” slow its pace of hiring in 2023, chief financial officer Ruth Porat said, after it cut 12,000 jobs last month, representing about 6 per cent of its overall workforce.
Advertisers, which contribute the bulk of Alphabet’s sales, have cut their budgets as rising inflation and interest rates fuelled concern over consumer spending. Consumers had flocked to the Internet for everyday purchases during the height of the pandemic but have returned to in-person shopping as restrictions eased.
“Our revenues this quarter were impacted by pullbacks in advertiser spend and the impact of foreign exchange,” Mr Pichai told analysts on a conference call. He said artificial intelligence (AI) software will be an important focus for the company and that it plans to make its chatbot software publicly available in the coming weeks.
Alphabet is doubling down on AI, where it is facing competition from Microsoft, which is reportedly looking to boost its stake in ChatGPT – a promising chatbot that answers queries with human-like responses.
Net income fell to US$13.62 billion (S$17.9 billion), or US$1.05 a share, from US$20.64 billion, or US$1.53 a share, a year earlier. Adjusted profit of US$1.05 a share fell short of an expected US$1.18 a share, according to Refinitiv.
Revenue from Google advertising, which includes Web search and YouTube, fell 3.6 per cent to US$59.04 billion. Total revenue rose to US$76.05 billion in the fourth quarter from US$75.33 billion a year ago. Analysts were expecting US$76.53 billion.
Google is the world’s largest digital ad platform by market share, making it uniquely susceptible to fluctuations in online marketing spending. Its YouTube division has faced a surge in rival platforms, particularly TikTok, whose endless scroll of short videos is drawing younger users away.
Revenue from YouTube ads, one of Alphabet’s most consistent money-makers, fell nearly 8 per cent to US$7.96 billion, well below the estimate of US$8.25 billion, according to FactSet.
Google’s cloud platform was a bright spot, however, with revenue growing 32 per cent to US$7.32 billion, but at its slowest pace since the company began disclosing the segment’s revenue numbers. REUTERS
