google-parent Alphabet (GOOGL) reported lower-than-expected September quarter earnings and revenue as its core digital advertising business failed to meet lower expectations. GOOGL stock fell on Google’s revenue news as YouTube’s ad revenue fell.
The internet search giant released Google’s post-market earnings report on Tuesday. Google said third-quarter earnings fell 24% to $1.06 per share. The company reports earnings according to generally accepted accounting principles, also known as GAAP.
Gross revenue rose 6% to $69.09 billion amid exchange rate headwinds. In the prior year period, Google’s revenue increased by 41%.
Analysts had predicted Google earnings of $1.26 per share on revenue of $71 billion. A year earlier, Google reported earnings of $1.40 per share on revenue of $65.1 billion.
“Google reported an overall advertising failure in the third quarter as search, YouTube and the ad network were all weaker than expected, partially offset by lower cloud revenue,” the report said. Cowen analyst John Blackledge in a report.
He added: “Management cited tough (year-over-year) comparisons, pullback from some advertisers and worse FX (exchange rates).
GOOGL action: drop in YouTube revenue
YouTube ad revenue fell nearly 2% to $7.07 billion amid increased competition from TikTok. Stock analysts at GOOGL had estimated YouTube’s ad revenue at $7.5 billion, up 3.5%.
“While we remain optimistic about YouTube’s multi-year revenue opportunities around Shorts and its leadership in Internet TV, these products may take time to grow and significantly impact YouTube given the focus of GOOGL on engagement rather than monetization and the weaker macro environment,” Morgan Stanley analyst Brian said. Nowak in a report.
Meanwhile, Google’s overall ad revenue rose 2.5% to $54.48 billion, missing estimates of $56.58 billion.
Google said cloud computing revenue rose 37% to $6.87 billion, beating estimates of $6.7 billion.
Alphabet repurchased $15.39 billion of its own stock, roughly the same as the June quarter of 2022.
Google said it would slow hiring in the December quarter and into 2023. Google had 186,779 employees as of September 30, up 24% from a year earlier.
Alphabet’s capital spending rose 7% in the third quarter to $7.3 billion.
“We are surprised that Google continued to hire and invest aggressively throughout the third quarter as macroeconomic trends deteriorated,” EvercoreISI analyst Mark Mahaney said in a report.
GOOGL stock holds a relative strength rating of 46 out of the best possible 99, according to IBD Stock Check.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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