Slowing sales at tech giant Google have contributed to fears and concerns of a downturn in the economy.
Alphabet, which owns Google and YouTube, sales rose just 6% in the three months to September, to $69bn falling short of the $71.3 billion estimate as companies cut their advertising budgets and revenue
Alphabet, saw its shares fall 5.1% in extended trading after it missed analyst expectations on both the top and bottom lines marking the US firm’s weakest quarterly growth in nearly a decade outside of the start of the pandemic.
Google Cloud revenue came in at $6.9 billion which was better than expected with acquisition costs on the way down.
Rising prices and interest rates are driving consumers and businesses to cut back around the world, fueling fears of a global recession
According to Microsoft the demand for its computers and other technology had also weakened with sales rising by 11% to $50.1bn, marking the tech giants slowest revenue growth in five years.
In the first quarter, Alphabet’s profit fell by nearly 30% to $13.9bn, because YouTube ad revenue was down for the first time since the company began publishing those figures publicly.
Alphabet Boss Sundar Pichai says the company was “sharpening” its focus and “being responsive to the economic environment”.
Principal analyst at Insider Intelligence, Evelyn Mitchell says when Google stumbles, it’s a bad omen for digital advertising at large.
Mitchell also noted that Google’s core website has in the past been more resilient to ad spending downturns than social media sites like Facebook or Snap.
“This disappointing quarter for Google signifies hard times ahead if market conditions continue to deteriorate.” says Mitchell
Google’s advertising revenue was $54.5bn in the third quarter. However, it came in below analysts’ expectations at $53.1bn.
Experts say Alphabet’s disappointing earnings show it is not immune to such challenges, which usually results in a slowdown in advertising spending.
Revenue from YouTube ads specifically decreased for the first time since YouTube reported its earnings separately in late 2019, dropping about 2% to $7bn from $7.2bn this time last year.
Senior analyst at Investing.com Jesse Cohen says despite being seen as one of the most insulated companies in the advertising space relative to peers,
“Google’s poor quarter is the latest sign that worsening fundamentals and a tough macroeconomic environment are prompting advertisers to cut back on spending,” says Cohen
In August, Alphabet announced that it would slow down or even halt hiring in certain divisions in response to these worries.
During a call with investors on Tuesday, Chief financial officer Ruth Porat said that the slowdown will not become apparent until 2023.
Alphabet added nearly 13,000 employees this quarter and expects to add less than half of that in the upcoming quarter.
Investors will be paying close attention to other tech companies this week, including Meta, Amazon, Apple, and Uber, as they release their results, given the ongoing slowdown and difficult results from Alphabet.
