Alphabet shares with gains: Google parent is growing – profits are falling

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Google is also feeling the effects of the downturn in the online advertising market: The business grew more slowly in the past quarter and the profit of the parent company Alphabet fell significantly. At the same time, the online giant demonstrated that it is in a good position to weather the market weakness better than its smaller competitors.

Alphabet’s quarterly profit fell year-on-year from $18.5 billion to $16 billion, the Internet giant announced on Tuesday after the US stock market closed. Sales increased meanwhile by 13 percent to 69.7 billion dollars (68.9 billion euros). The most important area of ​​the group – Google’s advertising business – grew by 11.6 percent year-on-year to $56.3 billion.

With high inflation and a weakening economy, online advertising spending is on the horizon as companies step on the brakes on costs. With the video app Snapchat this made itself felt with the slowest growth rate to date. One question is whether the two giants, Google and Facebook, will also feel the effects of the cooling – or whether their size and efficiency will make them more attractive to advertisers, especially in the current situation.

An advantage of Google’s platform for advertisers is that they can place their ads on the relevant search queries of users – and the internet company has a good overview of what people are interested in at the moment. For example, Google manager Philipp Schindler said in a conference call with analysts that searches for designer outlets worldwide had increased by 90 percent in the second quarter.

The business with advertising in the context of Google’s Internet search grew by 13.5 percent year-on-year to around 40.7 billion dollars. The proceeds on the video platform YouTube increased more slowly than before by 4.8 percent to a good 7.3 billion dollars. Chief Financial Officer Ruth Porat pointed out that the prior-year quarter, with the upturn after the first pandemic restrictions were eased, had been exceptionally strong. At the same time, she acknowledged that some advertisers were reducing their spending. The operating profit of the Google services grew only from 22.34 to 22.77 billion dollars. Headwinds are to be expected in the current quarter, said Porat.

The race to catch up with Amazon and Microsoft in the cloud business continues to cost Google a lot of money. While the division’s sales grew 35.6 percent to nearly $6.3 billion, its operating loss also widened by 45 percent to $858 million.

Although some of the analysts’ expectations were missed, investors were satisfied with the numbers and let Alphabet’s shares rise about four percent in premarket trading on Wednesday. The price of the Snapchat company Snap, on the other hand, fell by more than a third after disappointment about its weakened growth last week.

“I think it’s a good moment to sharpen our focus,” Google and Alphabet CEO Sudar Pichai said in a conference call with analysts. The group will continue to think long-term and invest in artificial intelligence, among other things.

Sales of the so-called “other bets” under the Alphabet umbrella, such as the robot car company Waymo, stagnated at $193 million. The operating loss of the area grew at the same time from 1.4 to almost 1.7 billion dollars. At Waymo, Alphabet is currently investing in the development of a robotaxi service in San Francisco, among other places.

Alphabet shares are higher in trading on the US NASDAQ stock exchange, temporarily gaining 5.31 percent to $111.04.

Editorial office finanzen.net / dpa-AFX

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