Alphabet’s growth continues to slow in second quarter

Alphabet, the parent company of Google, presented its financial results for the second quarter of 2022, extending from April to June. As expected, the company is clearly losing momentum compared to last year, which reflects the current state of the technology sector while the economic situation remains uncertain.

Google’s advertising business remains very robust

After a first year in loss of growth, the turnover of Alphabet for the second quarter is 69.69 billion dollars. This is slightly lower than the predictions which established an amount of 69.9 billion dollars. This is a growth of 13% compared to the same period last year, where this increase was 62% compared to 2020. The Mountain View firm’s net profits fell by 14% compared to to 2021 and are $16 billion.

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Unsurprisingly, the Google Search & Other division, which brings together the company’s advertising activities on its search engine, is its biggest breadwinner since it generated $40.69 billion; this is a significant increase over last year and better than estimates. This good result can be explained in particular by requests related to retail and travel, while more and more people are starting to travel again.

YouTube in decline

Virtually all of Alphabet’s other businesses fell short of estimates, and their growth is markedly down from the huge rebound in 2021 as the sector was in full post-pandemic recovery. Thus, YouTube revenues increased by 5% to $7.34 billion; their growth was 84% ​​last year. These results are still much more encouraging than those of Snap, which recently declared a disastrous quarterly result despite a gain in users.

Google Cloud Division’s sales, meanwhile, rose 36% year-over-year to $6.28 billion in the second quarter. The division, however, posted an operating loss of $858 million in the quarter, reflecting the strong spending push by Google as it tries to catch up with Amazon Web Services (AWS) and Microsoft in the cloud market, as This is demonstrated, for example, by the takeover of the cybersecurity company Mandiant.

The Other Bets branch, which includes the firm’s self-driving division, Waymo, among other things, saw its revenue increase by $1 million. “ Looking ahead, last year’s very strong revenue performance continues to create difficult comparisons that will weigh on annual advertising revenue growth rates for the remainder of the year. Ruth Porat, the company’s chief financial officer, said on a conference call with Alphabet shareholders.

The YouTube app on a smartphone.

YouTube’s revenue increased significantly less than in the same period of 2021. Photography: Hello I’m Nik / Unsplash

Many factors weigh in the balance

In addition to a slowdown in global growth, Google’s loss of momentum can be explained by other factors, such as the complete withdrawal of its activities in Russia for example. In addition, large US multinationals are bringing in less and less cash when converting foreign income due to the current strength of the dollar. Alphabet explained that its turnover would have been close to 72 billion dollars without currency fluctuations. In fact, approximately 55% of the company’s sales come from outside the United States.

Google is the target of many surveys around the world, and charges less on in-app purchases because of it. The company also explains that users spent less on apps during the second quarter.

It should also be noted that rising wages as well as rising fuel and other commodity prices have forced some advertisers to cut back on marketing spending this year. The firm also has many more employees than last year: it ended the second quarter of 2021 with 144,056 employees compared to 174,014 this year.

In this context, Sundar Pichai recently spoke to his workers to prepare them for difficult times with a brake on recruitment, and even a total hiring freeze for a period of two weeks.

An uncertain economic future, but Alphabet should get by

Although Google’s quarterly results mark a decline in its growth, shareholders were relieved when they announced that they were actually expecting much worse, reveals Reuters. Incidentally, the company’s shares rose slightly after the earnings announcement.

Alphabet did not make any predictions for the next quarter, but it expects growth to continue to fluctuate uncertainly. Despite everything, it remains better prepared than other companies since it generates its income from a wide variety of activity sectors.

Overall, however, the firm’s shares have lost about a quarter of their value this year.

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