Alphabet’s quarterly revenue growth fell to it slowest pace in two years, confirming dour sentiment in the digital ads industry and reflecting challenges with the strengthening US dollar.
The Google parent said revenues rose 13 per cent in the June quarter to $69.7bn, missing estimates for $70.8bn and marking the fourth quarterly slowdown in a row compared with the previous year.
Operating margins also slipped to 28 per cent, down 3 percentage points from a year ago. Net income shrank to $16bn from $18.5bn a year ago, missing Wall Street’s prediction of $17.4bn. Earnings per share came in at $1.21, versus analysts’ estimates for $1.27.
The stock jumped as much as 4 per cent in after-hours trading, as investors “blew a sigh of relief” that the results were not worse, according to Jesse Cohen, senior analyst at Investing.com, who described the quarter as “disappointing . . . across almost all business units.”
Analysts had been expecting weak growth, in part because revenues had soared 62 per cent a year ago as Google benefited from the coronavirus-induced work-from-home trend. In recent weeks projections had dimmed further, as fears of a US recession heightened and smaller rivals such as Snap released underwhelming earnings.
The 13 per cent growth puts Alphabet on a clear downward trajectory, as growth was 23 per cent in the March quarter, 32 per cent in the December quarter, and 41 per cent in the September quarter.
Alphabet finance chief Ruth Porat called second quarter performance “solid”, noting that on a constant currency basis revenues were up 16 per cent. “We are focused on responsible capital allocation in support of our growth opportunities.”
The group reported costs and expenses of $50.2bn, up 18 per cent from a year ago.
Chief executive Sundar Pichai added: “The investments we’ve made over the years in AI and computing are helping to make our services particularly valuable for consumers, and highly effective for businesses of all sizes. As we sharpen our focus, we’ll continue to invest responsibly in deep computer science for the long term.”
In advertising, revenues at Google Search grew 13 per cent to $40.7bn, while YouTube rose 5 per cent to $7.3bn. Its Google Cloud division revenues grew 36 per cent to $6.3bn, but produced a loss of $858mn in the quarter, wider than the $591mn loss recorded a year ago. Other Bets, the division that houses Google’s self-driving unit, Waymo, produced a loss of $1.7bn, versus a loss of $1.4bn a year ago.