Alphabet Misses On Earnings As YouTube Shrinks

• Alphabet missed analyst expectations on the top and bottom lines.
• Revenue at YouTube declined, while analysts were expecting growth of about 3%.
• Total growth of 6% marked the weakest period of expansion since 2013, other than one period during the pandemic.

Google reported its fifth consecutive quarter of slowing sales growth, with its YouTube video platform posting a drop in advertising revenue for the first time since the company began reporting the unit’s performance.

The Wall Street Journal reports the results show weakness in the economy spreading to some of its more resilient names, including many tech companies that saw their sales and stock prices rise during the pandemic. Microsoft Corp. on Tuesday reported its worst quarterly earnings in more than two years, and Texas Instruments Inc. said it was seeing flagging demand in personal electronics and from some other industrial buyers. 

The Google results point to continued fragility for the digital-advertising industry, which has been clobbered in recent months. Some of Google’s core properties, including YouTube and search, which have long been drivers of the company’s overall performance, showed surprising weakness.

Alphabet Inc., Google’s parent company, reported revenue of $69.1 billion in the third quarter, an increase of 6.1% from the same period last year but less than analysts expected. 

In a period when the company’s executives have talked about becoming more disciplined in hiring, Alphabet’s full-time employee base increased by almost 12,800 workers in the quarter, the biggest change on record. Alphabet shares fell more than 6% in after-hours trading. 

Alphabet’s revenue growth in the third quarter was the company’s lowest since the second quarter of 2020, when the company lost business as the coronavirus stoked fears among advertisers. Sales rose 41% in the third quarter last year, by comparison.

Google has recently pushed big brands toward a suite of automated tools for purchasing advertising across the company’s own properties and other online publishers, a move analysts have credited with boosting the core search-advertising business. 

The search business reported revenue of $39.5 billion in the third quarter, an increase of 4.3%.

Advertising revenue on Google’s YouTube video platform fell 1.9% to $7.1 billion, the first time sales have dropped since Alphabet began reporting the unit’s financial performance in 2020. YouTube relies more heavily on so-called brand advertising than other parts of Google’s business, making it more susceptible to the pullback in spending.