Alphabet sees a major drop in the revenue growth for its advertising business due to the unwelcoming macro advertising environment.
It’s the season of corporate earnings and tech giant Alphabet (NASDAQ: GOOGL) reported its results for Q2 2022 on Wednesday, July 27. However, the results saw mixed reactions coming from Wall Street analysts.
Alphabet Q2 2022 Earnings
Alphabet reported $69.9 billion in revenue for Q2 with earnings per share at $1.21. These numbers are below conses estimates due to slowing growth over the last year. From 62% revenue growth last year, it has dipped to only 13%. At the same time, the advertising revenue grew very slowly at just 12%. After surging 84% the year ago, YouTube advertising revenue jumped only 5% this time.
Due to the unwelcoming macro environment, advertising revenues for other companies have also been on a decline. A few days back, Snapchat (NYSE: SNAP) delivered disappointing quarterly results. It also warned that advertising sales during the early third quarter remain flat. This is much behind the analysts’ expectation of 18% growth for the quarter.
Interestingly, Google’s search revenue jumped to $40.6 billion, up from $35.6 billion the year ago. Philipp Schindler, Google’s chief business officer attributed this growth to the surge in travel and retail queries.
Additionally, Google’s cloud revenue also stood at $6.28 billion against the expected $6.41 billion. Google has been trying to compete with the two top players Microsoft Azure and Amazon Web Services, in the cloud space.
GOOGL Stock Shoot 7.6%
Despite Alphabet’s results being not very impressive, the GOOGL stock shot up 7.66% on Wednesday. JMP’s analysts told its clients that they maintain an outperform rating on Alphabet with a target price of $160. The analysts wrote:
“With advertising revenue approximately in line with consensus and as shares were down 11% since reporting 1Q earnings, we view the report positively despite us reducing forward estimates. Our primary takeaway is that search’s demand is persistent even in a tough macro advertising environment given its consistent and high ROI while benefiting from its diversification across online and offline as well as across verticals and geographies”.
As of Wednesday’s closing, the GOOGL stock was trading at $113 levels. The stock price is still down by 22% year-to-date. Although Alphabet has increased its full-time employee headcount by 21%, the company said that it will slow the pace of hiring and investments through 2023.
In a note to its employees, company CEO Sundar Pichai said that they “are not immune to economic headwinds”.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
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