NEW YORK (BLOOMBERG) – Google parent Alphabet reported second-quarter revenue that met analysts’ expectations, reflecting the Internet giant’s resilience amid slowing growth in advertising.
Revenue, excluding payments to distribution partners, was US$57.5 billion (S$80 billion) in the quarter, the company said on Tuesday (July 26) in a statement. Analysts had projected US$58 billion, according to data compiled by Bloomberg.
Google’s sales gains indicate that the company’s advertising business – especially its search ads – may be positioned to weather a crunch in marketing spending, which has affected smaller competitors, including Snap and Twitter.
By contrast, Google’s ad sales beat analyst expectations. The company is nevertheless remaining cautious, and has temporarily paused hiring.
On the company earnings call, chief executive officer Sundar Pichai referenced the company’s vigilance amid economic uncertainty and a pullback in spending from advertisers, saying Google would continue to invest, but would do so “responsibly”.
Chief financial officer Ruth Porat said in an interview with Bloomberg Television that data on the macroeconomic environment “remains complicated”. At the same time, she said Google was “very pleased” with its performance in search, the growth of which was especially driven by the travel and retail industries.
The performance reflected “elevated consumer online activity and broad-based strength in advertiser spend” she said in the statement.
Alphabet shares rose as much as 5.7 per cent in after-hours trading on Tuesday. The stock has fallen 27 per cent so far this year.
“I would construe this report as a sigh of relief,” said Mr Dan Morgan, senior portfolio manager at Synovus Trust Company. “I think the fact that ad revenues beat (expectations) in a very hostile environment has to be a feather in its cap; that Google can deliver even when competitors are really struggling.”
In spite of Google’s strong results on advertising, it slightly missed analysts’ expectations on YouTube and its cloud business. Profits disappointed too; net income was US$16 billion, or US$1.21 a share, missing analysts’ average projection of US$1.32 a share.
YouTube generated ad revenue of US$7.34 billion, compared with analysts’ average estimate of US$7.47 billion. The app is increasingly competing for advertising dollars and attention with ByteDance’s TikTok, while managing the effects of Apple’s privacy requirements for its apps, which have made it harder to target advertising.
Google’s closely watched cloud division, which has yet to turn a profit, generated US$6.3 billion in revenue and lost US$858 million, up from a loss of US$591 million during the same quarter last year. Although Google is a distant third in the cloud market, trailing Amazon.com and Microsoft, the effort is nonetheless viewed as one of the company’s best bets for growth as the core search business matures.
Mr Pichai touted the business’ “strong momentum and substantial market opportunity” on the call.
source https://netdace.com/latest-news/google-reassures-wall-street-with-ad-business-showing-resilience/