Alphabet Misses Earnings Forecast, But Pleases With Strong Ad Performance

Alphabet has revealed a decline in profits, but strong advertising revenues reassured investor confidence in its ability to handle an economic downturn.

Overall Alphabet posted healthy results, but quarterly profits declined and revenues narrowly missed analyst expectations.

And the mostly positive results come amid growing economic uncertainty around the world that already seen CEO Sundar Pichai earlier this month confirming a slow down of hiring and consolidation of investments through 2023 at the tech giant.

Second quarter results

But despite the current hiring freeze, Alphabet’s workforce has swelled over the past year to 174,014 Googlers as of 30 June, up from 144,056 a year ago.

So how did Alphabet actually perform in the second quarter, financially speaking?

Well for the second quarter ending 30 June, Alphabet posted a net profit of $16bn, down from a net profit of $18.5bn in the same year-ago quarter.

Revenues meanwhile rose an impressive 13 percent to $69.7bn from $61.9bn a year earlier.

This was nearly in line with the average analyst expectation of $69.9bn.

“In the second quarter our performance was driven by Search and Cloud,” noted CEO Sundar Pichai. “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,” he added.

Divisional performance

Digging down into Alphabet’s divisions, Google Search revenues rose to $40.7bn from $35.8bn a year earlier.

YouTube ad revenue rose modestly to $7.3bn from $7bn; Google advertising rose to $56.3bn from $50.4bn, and Google Cloud rose to $6.3bn from $4.6bn in the same year-ago quarter.

These results pleased Wall Street, despite missing some of its expectations, and shares in the firm rose 3 percent after hours.

Investors have, it seems, been reassured that Alphabet’s search and advertising business can weather economic downturn and a potential global recession.