Slowing ad sales, particularly in YouTube, lead Google parent Alphabet to weaker-than-expected third quarter earnings.
Updated at 4:46 pm EST
Alphabet (GOOGL) – Get Alphabet Inc. Report posted softer-than-expected third quarter Wednesday thanks to slowing ad sales growth that echoes a warning last week from messaging ap maker Snap (SNAP) – Get Snap Inc. Class A Report.
Group revenues rose 6.1% from last year to $69.1 billion, a tally that soundly missed the Street consensus forecast of $70.6, as ad sales rose 2.5% to $54.48 billion.
Search and other revenues rose 4.25% to $39.54 billion, just shy of Street forecasts, while YouTube ad sales fell 1.9% to $7.07 billion. Google cloud revenues were up 37.6%, albeit from a much lower base, to $6.87 billion.
Google’s bottom line came in at $1.06 per share over the three months ending in September, compared to last year’s split-adjusted figure of $1.39 per share, a tally that missed Street forecasts by around $1.25 per share.
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“We’re sharpening our focus on a clear set of product and business priorities,” said CEO Sundar Pichai. “Product announcements we’ve made in just the past month alone have shown that very clearly, including significant improvements to both Search and Cloud, powered by AI, and new ways to monetize YouTube Shorts.”
“We are focused on both investing responsibly for the long term and being responsive to the economic environment,” he added.
Google shares were marked 5.34% lower in after-hours trading immediately following the earnings release to indicate a Wednesday opening bell price of $98.90 each.
Last week, messaging app-maker Snap warned that its holiday quarter would see little to no revenue growth amid a pullback in global ad spending, a forecast that rippled through the social media space, hiving more than $40 billion in market value from rivals such as Twitter (TWTR) – Get Twitter Inc. Report, Pinterest (PINS) – Get Pinterest Inc. Class A Report and Meta Platforms (META) – Get Meta Platforms Inc. Report over a single trading session.
Last month, Google said it would allow advertising on its short-form videos within YouTube, while sharing 45% of the revenue with content creators, as it looks to fend-off the ongoing challenge for audience and market share from China-based TikTok and its 1 billion monthly users.
