Alphabet, parent of Google and YouTube, undershot Wall Street analysts’ consensus forecasts for the second quarter, reporting $69.7 billion in revenue and earnings per share of $1.21.
While the miss wasn’t by much — the Street expected revenue of $70 billion and earnings of $1.31 — the quarter also marked the company’s second straight quarter of year-over-year earnings declines. It’s the first such double-whammy since 2015.
Earnings per share fell to $1.21 from $1.36 a year ago, but revenue increased 13%. A less healthy showing in total revenue would have exacerbated fears of an imminent recession.
YouTube ad revenue climbed just 5% from the year-ago period, reaching $7.34 billion, a significant slowdown from the first quarter’s 14% year-over-year growth rate. Last week, downbeat advertising reports from tech firms Twitter and Snap Inc. sent a shiver through the markets, suggesting broader disruptions to come for the ad business as companies release financial results in a turbulent time. Revenue has flowed steadily into digital platforms over the past couple of years, but all media buys are getting a rethink during a period of widespread economic disruptions from inflation to ongoing issues with the supply chain.
YouTube has increasingly focused on its TikTok rival, YouTube Shorts. Last month, the company said short-form videos on the emerging platform have been viewed by 1.5 billion logged-in accounts, with about 2 million visitors coming in each month. Advertising has just started to roll out on YouTube Shorts.
Sundar Pichai, CEO of Alphabet and Google, pointed to progress in search and cloud operations in the quarter. “As we sharpen our focus, we’ll continue to invest responsibly in deep computer science for the long-term,” he said in the company’s official earnings release.
Search revenue, still the dominant line item on the balance sheet, increased almost 14% over the year-ago period to hit $40.7 billion. Cloud revenue, meanwhile, increased to $6.3 billion from $4.6 billion.
While the numbers were generally uninspiring, investors appear to have been bracing for worse. In after-hours trading, shares in Alphabet perked up more than 2%, past $108, on the earnings news.
Earlier this month, on July 15, the company completed a 20-for-1 stock split. A special, one-time stock dividend was paid on each share of the company’s Class A, Class B, and Class C stock.
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