Feb 2 (Reuters) – Alphabet Inc ( GOOGL.O ) on Thursday missed Wall Street expectations for quarterly profit and revenue as parent Google’s digital advertising business struggled with an economic slowdown that has stifled corporate spending and triggered sweeping layoffs.
Shares of Alphabet, after losing about 40% of their value in 2022, were down about 4% in after-hours trading.
Revenue from Google advertising, which includes search and YouTube, fell 3.6% to $59.04 billion.
“We are on an important journey to re-engineer our cost structure in a sustainable way,” Alphabet Chief Executive Sundar Pichai said in a statement, echoing Meta Platforms ( META.O ) boss Mark Zuckerberg’s emphasis on cost efficiency on Wednesday.
Advertisers, who contribute the bulk of Alphabet’s sales, have scaled back spending as rising inflation and interest rates worry about consumer spending. Consumers flocked to the internet for everyday shopping during the height of the pandemic but have returned to in-person shopping as restrictions ease.
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“Despite being viewed as one of the hottest companies in advertising, Alphabet’s weak quarter is the latest sign that rising fundamentals and a tough macroeconomic environment are prompting advertisers to cut spending,” said Jesse Cohen, senior analyst. at Investing.com.
Rival Meta Platform impressed investors with its quarterly results on Wednesday, promising to further cut costs and boost offerings to better capitalize on ad dollars.
Alphabet’s net income fell to $13.62 billion, or $1.05 per share, from $20.64 billion, or $1.53 per share, a year earlier.
Adjusted earnings of $1.05 per share fell short of an expected $1.18 per share, according to Refinitiv.
Revenue rose to $76.05 billion in the fourth quarter from $75.33 billion a year earlier. Analysts were expecting $76.53 billion.
Google is the world’s largest digital advertising platform by market share, making it uniquely sensitive to fluctuations in online marketing costs. Its YouTube division has faced a surge in rival platforms, particularly TikTok, whose endless scrolling of short videos is alienating young users.
Revenue from YouTube ads, one of Alphabet’s most consistent money-makers, fell nearly 8% to $7.96 billion, missing estimates of $8.25 billion, according to FactSet.
Cloud was a bright spot, however, with revenue growing 32% to $7.32 billion, but it was the slowest pace since the company began releasing revenue numbers for the segment.
The Mountain View, Calif.-based company slowed hiring last year before deciding last month to cut 12,000 jobs, representing about 6% of its overall workforce. Like rivals, Alphabet grew during the pandemic and over the past year, adding 12,700 new jobs in the third quarter alone.
Alphabet’s cuts affected virtually all of Area 120’s unit to incubate experimental projects, and in September, it shut down Stadia, an online video game streaming service.
Reporting by Nivedita Balu in Bengaluru and Greg Bensinger in San Francisco Writing by Sayantini Ghosh Editing by Devika Syamanath and Matthew Lewis
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