Alphabet shares fall 5% premarket as Google ad sales decline and earnings miss targets.
Google's parent company reported fiscal fourth-quarter total revenue of $76.05 billion, up from $75.3 billion a year ago. Earnings were $13.62 billion, or $1.05 per share, compared with $20.64 billion, or $1.53 per share, last year. Alphabet's revenue, minus traffic-acquisition costs, was $63.12 billion, vs. $61.9 billion a year ago.
"We're on an important journey to re-engineer our cost structure in a durable way and to build financially sustainable, vibrant, growing businesses across Alphabet," Chief Executive Sundar Pichai said in a statement announcing the results. The company recently announced 12,000 layoffs and has scaled back hires.
In a conference call later with analysts, Google Chief Business Officer Philipp Schindler said a "pullback" in spending by advertisers amid a more challenging economy as well as foreign-exchange headwinds impacted sales.
Analysts polled by FactSet expected Alphabet $(GOOGL)$(GOOGL) to report total revenue of $76.2 billion and earnings of $1.18 per share, with sales expected to be in line with last year's results and profit declining from the holiday season a year ago. Revenue, minus TAC, were modeled at $63.2 billion, which also suggests little to no growth from last year.
Google's total advertising sales slid to $59 billion from $61.2 billion a year ago, missing analysts' average expectations of $60.44 billion. Google Cloud brought in $7.32 billion, compared with $5.54 billion last year. YouTube ad sales slipped to $7.96 billion from $8.63 billion a year ago.
"The search giant underperformed our expectations across almost all business units, most importantly its core ad-search segment," Jesse Cohen, senior analyst at Investing.com, said. "Once again, YouTube growth slowed to a crawl amid tough competition from TikTok and other players in the video-streaming space."
A dip in digital advertising has defined the past few quarters for Google, Meta Platforms Inc. $(META.UK)$, Snap Inc. (SNAP), Pinterest Inc. $(PINS)$ and other companies dependent on ads. Meta's better-than-expected quarterly report Wednesday was a sign of encouragement after Snap had another desultory quarterly performance.
"After Alphabet's advertising revenue cycle reached peak growth" in the second quarter of 2021, revenue for this part of the business is set to decelerate for the sixth quarter in a row, said Monness, Crespi, Hardt analyst Brian White, who forecast a 3% drop in the recently completed quarter.
On Thursday, Alphabet Chief Financial Officer Ruth Porat said that beginning inthe current quarter, AI subsidiary DeepMind will be included in Alphabet's corporate costs rather than in Other Bets.
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