Alphabet Q2 earnings miss Wall Street expectations, with fallen profits reflecting a slowing ad market

After Snapchat triggered ripples of fear across the US stock market with its disappointing earnings results and guidance last Friday, Google’s parent company Alphabet has confirmed the weakened state of the digital advertising market, with Q2 earnings revealing dipped profits despite hiked revenues.

Alphabet Inc. has released its Q2/H1 earnings, with revenues of US$69.69 billion just missing Wall Street forecasts of US$69.95 billion.

Despite increased revenues compared to Q1, profits have fallen at Google. Alphabet brought in approximately $16 billion in profit during its second quarter of 2022, down from $18.5 billion during the same period last year, the company reported in its Q2 2022 earnings report today (AEST).

The stock value of GOOGL has fallen significantly in 2022, although year-to-date losses of 23% are largely in line with broader NASDAQ trends.

The tech giant said adjusted earnings per share hit $1.21 during the second quarter, compared to $1.32 expected by analysts.

Amid fears of inflation and economic pressures, Google’s advertising revenue is suffering strong headwinds as the economy slows down – Google already announced its hiring slowdown earlier this month in preparation for potential recession.

Advertising revenue increased just 12% to $56.3 billion in Q2.

Alphabet and Google CEO Sundar Pichai said: “In the second quarter our performance was driven by Search and Cloud. 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.”

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Google Cloud revenue was reported at $6.28 billion, also missing the $6.41 billion forecasted.

In Q2 2022, YouTube ad revenue was US$7.34 billion (versus US$7 billion a year ago).

“Google other revenues” — which includes hardware, Play Store, and non-advertising YouTube revenues — reported $6.55 billion, compared to $6.6 billion the same quarter last year.

In the first quarter of 2022, 80% of Google’s total revenue came from Google advertising, including revenue from Google search, ads on YouTube, and the Google network. In the event of a recession, advertising revenue would be the first sector to feel the pain – meaning that Google’s ‘Search and Cloud’ driven performance may spell economic troubles ahead.

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In Q1 this year, revenues for the quarter gained 23% to $68.01 billion (A$95.36 billion) from $55.31 billion (A$77.45 billion) last year.

The company had reported a revenue growth of 34% growth in the first quarter of 2021 and 32% in the fourth-quarter of 2021.

Google’s advertising revenues rose to $54.66 billion (A$76.54 billion) from $44.68 billion (A$62.56 billion) last year, as YouTube ad and Google Search revenues increased. Google Cloud revenues rose to $5.82 billion (A$8.15 billion) from $4.05 billion (A$5.67 billion) in 2021.

Last quarter, Google Cloud performed well in all business segments as Q1 revenue rocketed 43.8% to $5.8 billion year-on-year.

Revenue in Q1 2022 was $49.4 billion (A$69.1 billion) and increased 18%. Operating income was $20.4 billion (A$28.5 billion) and increased 19%. Net income was $16.7 billion (A$23.3 billion) and increased 8% GAAP (up 13% non-GAAP). Diluted earnings per share was US$2.22 and increased 9% GAAP (up 14% non-GAAP).


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