Alphabet Inc., the parent company of Google, announced first-quarter revenue that fell short of analysts’ estimates, a rare failure for the internet giant due to sluggish ad sales in Europe and a poor showing by its YouTube video service. In extended trading, the shares fell by roughly 6%.
In addition, the business announced a $70 billion share repurchase programme.
In the quarter ending March 31, revenue grew 20% to $56 billion, excluding payouts to distribution partners, according to a statement released by Alphabet on Tuesday. Analysts predicted $56.1 billion on average.
The suspension of the company’s commercial activity in Russia, as well as broader turmoil as a result of the invasion of Ukraine, impacted sales, according to Chief Financial Officer Ruth Porat.
She told Bloomberg TV that “beyond that, there was a bit of a slowdown on ad spend in Europe.” Furthermore, she stated that “there is a lot of uncertainty in the macro environment.”
The company was up against a difficult comparison from a year ago, when it saw a 32 percent increase in advertising sales because to a rebound in commercial activity following the introduction of Covid-19 vaccinations, which helped to contain the virus and lift lockouts. In the first quarter of this year, Google’s ad sales increased by 22%.
YouTube earned $6.87 billion in ad income, compared to an average projection of $7.4 billion by analysts. In previous quarters, Google claimed that Apple Inc.’s ban on third-party ad targeting has hampered some of YouTube’s iPhone revenue. Daniel Salmon, an analyst at BMO Equity Research, cut his projections for YouTube sales ahead of the results, owing to increased competition from ByteDance Ltd.’s TikTok video app.
New European laws restricting ad targeting are likely to have hampered Google’s second-largest business line, its network system, which serves advertising elsewhere on the web. Total sales in Europe climbed 19% year over year, but fell 12% year over year in the fourth quarter.
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Still, according to Brian Wieser, global president of business intelligence at ad agency GroupM, Google’s ad growth is solid. “On its own, Google accounts for a third of the industry. “They’re still increasing at around 20%,” he remarked. “It’s the expectations, not the firm, that’s the problem.”
The company’s largest income generator, Google’s search advertising division, increased by 24% to $39.6 billion. Sales of cloud computing units surged by 44% to $5.82 billion. Both units outperformed expectations. The Mountain View, California-based company has spent a lot of money on hardware and people in recent years to attempt to catch up to market leaders Amazon.com Inc. and Microsoft Corp. in terms of offering computing power and storage over the internet.
In a statement, Chief Executive Officer Sundar Pichai said the quarter saw “great growth in Search and Cloud, in particular, which are both supporting people and companies as the digital transformation unfolds.”
Alphabet’s Other Bets subsidiaries, which include self-driving vehicle startup Waymo and Verily, which attempts to cure various health challenges with technology, generated $440 million in sales on $1.16 billion in losses, a significant increase over previous years.
The company’s net income was $16.4 billion, or $24.62 per share, compared to $17.9 billion, or $26.29 per share, a year ago. Analysts predicted a share price of $25.71 on average.
After closing at $2,373 in New York, Alphabet shares fell to a low of $2,207.79 in extended trading.
