Google parent Alphabet Inc. GOOG -3.04% saw slower revenue growth as the global economic turmoil disrupted digital advertising spending.
The company said its first-quarter revenue rose 23% from the year-ago period, the lowest rate for the tech giant since late 2020. Meanwhile, the company experienced a period of massive revenue growth that both small and large companies flocked to the advertising market is trying to attract customers who were isolated in their homes during the early days of the pandemic. The company’s revenue rose 41% last year.
Rising inflation, supply chain disruptions, Russia’s war in Ukraine and other factors have weighed on the economic outlook and, analysts say, companies’ willingness to spend on advertising. Snap Inc. said last week that this pressure impacted its financial results for the most recent quarter and could affect the advertising market going forward.
Russia’s attack on its neighbor, which began in the first quarter, had “an outsized impact on YouTube ads compared to the rest of Google,” Chief Financial Officer Ruth Porat said on a earnings call. This is due to both the suspension of the vast majority of commercial activities in the region and an associated reduction in spending, primarily from brand advertisers in Europe, she said.
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Alphabet halted some operations in Russia as the Kremlin targeted Western companies restricting some local government-affiliated broadcasters.
Google’s search advertising — which is often more closely tied to specific customer purchasing decisions than to broader branding campaigns — has been less affected by the broader economic concerns. A rebound in travel as pandemic restrictions eased further helped underpin the company’s revenue growth, according to analysts.
Google’s Chief Business Officer Philipp Schindler said that “it seems like people are moving again.” Travel searches for the quarter were above what the company had seen in the first quarter of 2019 before the pandemic, he said.
Alphabet reported revenue of $68 billion in the first three months, matching Wall Street expectations. Net income, weighed down by accounting factors related to some investments, fell 8.3% to $16.4 billion, below the consensus estimate of analysts polled by FactSet.
Shares of the company closed down more than 3% on Tuesday and continued to decline after the results.
Ms. Porat said some of the issues that weighed on first-quarter results, including last year’s inflated growth numbers and the suspension of operations in Russia, persisted in the current quarter.
YouTube, the largest video portal on the Internet, felt part of the turbulence on the advertising market. It contributed $6.87 billion to revenue in the first quarter, falling about $600 million short of Wall Street expectations. Alphabet has increased spending on YouTube to maintain its video lead by funding a TikTok alternative, YouTube Shorts, and adding live shopping.
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The Shorts feature, chief executive Sundar Pichai said, has grown to more than 30 billion daily views, four times the number a year earlier. The company’s focus was on the development and introduction of the feature. Earning money with it will come later.
Alphabet has seen sales growth in its cloud computing business, where it’s trying to catch up with Amazon. com Inc. and Microsoft Corp. The cloud business remains a strong investment area for the company, and Google Cloud Services remains unprofitable.
Last month, Alphabet said it plans to spend nearly $5.4 billion to buy cybersecurity firm Mandiant Inc. to better automate cyber defenses by merging specialized intelligence into one of the world’s largest platforms for cloud-based tools feeds.
Cybersecurity investments have become something of an arms race among cloud service providers, with a spate of ransomware and other attacks stoking customer concerns about data security. Microsoft, which also reported quarterly results on Tuesday, said revenue and profit rose as demand for its cloud services and software products continued to rise and the pandemic prompted more remote work.
Revenue for Google Cloud grew about 44% year over year to $5.8 billion, resulting in an operating loss of $931 million. Microsoft said in its earnings that revenue for Azure and its other cloud services rose 46% from the year-ago quarter. Amazon announces quarterly results on Thursday.
Alphabet also said it would buy back a portion of its stock, worth up to $70 billion.
– Robert Wall contributed to this article.
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