SAN FRANCISCO (AP) — Summertime revenue growth at Google’s corporate parent slipped to its slowest pace since the pandemic jarred the economy more than two years ago, with advertisers clamping down on spending and bracing for a potential recession.
Alphabet Inc., which owns an array of smaller technology companies in addition to Google, on Tuesday posted revenue of $69.1 billion for the July-September quarter, a 6% increase from the same time last year.
It marked the first time Alphabet’s year-over-year quarterly revenue has risen by less than 10% since the April-June period of 2020. At that time, the advertisers that generate most of its revenue pulled in their reins because of the economic uncertainty during the pandemic’s early months.
Google's ad sales weakened even more dramatically than Alphabet's overall revenue. Ad revenue totaled $54.5 billion, up just 2.5% from the same time last year. In another sign of more challenging times, YouTube's quarterly ad sales decreased 2% from last year, the first time the video site's revenue has regressed since Google began disclosing its results in 2019.
The revenue slowdown also created a drag on Alphabet's profits. The Mountain View, California, company earned $13.9 billion, $1.06 per share, a 27% drop from the same time last year. Both revenue and earnings per share fell below projections of analysts surveyed by FactSet.
Alphabet’s shares declined nearly 6% in extended trading after the numbers came out. The stock price has plummeted by more than 30% this year, erasing about $600 billion in shareholder wealth.
“Online ad spending is clearly slowing more than we thought," said David Heger, an analyst for Edward Jones. “It looks like it is going to be tough sledding for the next few quarters."
With revenue decelerating, Alphabet CEO Sundar Pichai said, “We’re sharpening our focus on a clear set of product and business priorities."
Google’s moneymaking machine, propelled by its dominant search engine, roared back as pandemic restrictions loosened last year and government stimulus juiced the economy, helping power Alphabet to a 41% increase in its revenue last year that lifted its stock price to new peaks.
But the economy has been sputtering in recent months as central bankers steadily lift interest rates to combat the highest inflation rates in more than 40 years, a strategy that is threatening to plunge the economy into a recession. As it is, many households already have been tightening their budgets and eschewing some discretionary items — a trend that has been prompting advertisers to spending less marketing their products and services. That obvious retrenchment signals a wide range of companies are starting to feel pinched, Heger said.
Alphabet has reacted by vowing to scale back its hiring, but the restraint wasn’t evident during the summer months. After adding 17,500 employees to its payroll during the first half the year, the company’s workforce increased by another 12,760 people in the past quarter. Alphabet ended September with nearly 187,000 employees.
Pichai told Alphabet employees last month be “a bit more responsible through one of the toughest macroeconomic conditions” of the past decade and urged employees to try not to “equate fun with money.”
Although the economy is squeezing its finances, Google is faring far better than other internet companies whose fortunes are tied to digital advertising. Facebook suffered its first year-over-year quarterly decline in revenue earlier this year and another social networking company, Snap, has been so hard hit that is stock price has plunged by more than 80% so far this year.
But Facebook, Snap and a variety of other internet services rely on being able to track its users’ whereabouts and online activities on smartphones to target ads. Apple began blocking that tracking on iPhones 18 months ago unless an individual allowed the surveillance. Google’s search engine is able to still gather personal information prized by advertisers through its search engine, minimizing the impact of Apple’s tougher privacy controls on its revenue.
Facebook's corporate parent, Meta Platforms, is scheduled to report its results for the latest quarter Wednesday afternoon.