Alphabet, the world's largest provider of search and video advertisements, reported a 27 per cent drop in third-quarter net profit on an annual basis, as the company missed analysts' sales expectations.
Net profit at Google's parent company dropped to about $13.9 billion in the three months to the end of September, from the same period in 2021.
Net profit on a quarterly basis fell about 13 per cent.
-
A bicycle path along Google's new Bay View campus. EPA -
Workstations in Google's new Bay View campus building. EPA -
Sitting area at Google's Campfire Corner in Google's new Bay View campus. EPA -
Sitting area at Google's Campfire Corner in Google's new Bay View campus building. EPA -
Interior view in Google's new Bay View campus building. EPA -
Interior view of Google's Campfire Corner in Google's new Bay View campus building. EPA -
Interior view in Google's new Bay View campus building. EPA -
An exterior view of building BV200 and Google shared bicycles during a tour of Google's new Bay View Campus. Reuters -
A seating area in Google's new Bay View campus building. EPA -
Google announced the opening of its new Bay View campus in Silicon Valley, representing the company's first time developing its own major campus. EPA -
Art work in Google's new Bay View campus. EPA -
An Office directory in Google's new Bay View campus. EPA -
Interior and ceiling view of BV200, Google's new Bay View campus building. EPA -
The Google bicycle Pedal Park inside Google's new Bay View campus building. EPA -
Binary code and art work on the window of Google's new Bay View campus. EPA -
The side of Google's new Bay View campus building. EPA -
An outdoor weight room in front of Google's new Bay View campus. EPA -
Binary code on the window of Google's new Bay View campus. EPA -
The Google logo in front of Google's Bay View Building. EPA -
An interior view of BV200, Google's new Bay View campus. EPA -
An Interior view of BV200, Google's new Bay View campus building. EPA -
A Google Android bot in the lobby of BV100, Google's new Bay View campus. EPA -
The Bay View campus was designed by architects Bjarke Ingels Group (BIG) and Heatherwick Studio, as well as Google's design and engineering teams and spans 42 acres adjacent to the open space, two office buildings, and 1,000-person event centre. EPA -
A coffee table made out of a wood stump in the sitting area at BV200, Google's new Bay View campus. EPA -
Google employees in the cafeteria area in Mountain View, California. EPA -
A Google employee in the cafeteria area in Mountain View, California. EPA -
A worker inside Google's new Bay View campus in Mountain View, California. Bloomberg -
A seating area inside Google's new Bay View campus. Bloomberg -
Inside Google's new Bay View campus in Mountain View, California. Bloomberg -
Workers inside Google's new Bay View campus. Bloomberg -
A mural inside Google's new Bay View campus in Mountain View, California. Bloomberg -
Inside Google's new Bay View campus in Mountain View, California. Bloomberg -
Workers in one of the many dining areas inside Google's new Bay View campus in Mountain View, California. Bloomberg -
Inside Google's new Bay View campus in Mountain View, California. Bloomberg -
Desks inside Google's new Bay View campus. Bloomberg -
One of nine pieces of art created by Bay Area artists for the campus. Reuters
It was the second consecutive quarter that the California-based technology conglomerate reported a double-digit drop in net profit.
Revenue during the period rose 6 per cent annually to more than $69.1bn below expectations of about $70.58bn, according to Refinitiv estimates.
It was the slowest pace of sales growth in more than two years and fell short of analyst expectations for an increase of 9 per cent.
After the earnings announcement, the company’s stock dropped 7 per cent in after-hours trading to $97.6 a share.
The company’s stock has dropped almost 7 per cent in the past 12 months. After moves of Apple and Tesla in the past couple of years, the company carried out a 20-for-1 stock split on July 15.
Alphabet is focused on “investing responsibly” for the long term and “being responsive to the economic environment”, Alphabet and Google chief executive Sundar Pichai said.
“We are sharpening our focus on a clear set of product and business priorities," Mr Pichai said.
“Product announcements we have made in just the past month alone have shown that very clearly, including significant improvements to both Search and Cloud, powered by AI [artificial intelligence], and new ways to monetise YouTube Shorts,” Mr Pichai added.
Alphabet, which employs 186,779 people globally, earned more than 48 per cent of its third-quarter revenue, or nearly $33.4bn, from the US market.
In Europe, the Middle East and Africa, the company earned $19.5bn, or 28.2 per cent of its total sales.
Alphabet’s operating income dropped 19 per cent on an annual basis in the third quarter to about $17bn. Its earnings for each share dropped 24 per cent yearly to $1.06, missing analysts’ estimates of $1.25.
Google services business — which includes advertisements, Android, Chrome, hardware, Maps, Search, Google Play and YouTube — accounted for nearly 90 per cent of the company’s total sales.
It added almost $61.4bn to overall revenue, nearly 2.4 per cent more than the third quarter of 2021.
Google’s advertising revenue from Search, YouTube and other businesses increased about 3 per cent yearly to nearly $54.5bn in the third quarter.
The total revenue from the cloud business grew an annual 38 per cent to about $6.8bn in the July-September period.
Google Cloud includes the company’s infrastructure and data analytics platforms, collaboration tools and other services for enterprise customers.
It generates revenue mainly from fees received for cloud platform services and workspace collaboration tools.
Alphabet said its operating loss in the cloud segment reached $699 million during the quarter. It expanded from the third quarter of last year, when the division’s loss was $644m.
The company’s operating loss from other bets, or subsidiaries, increased more than 25 per cent yearly to about $1.6bn.
Other bets are derived mainly through the sale of internet offerings, as well as licensing and research and development services.
This includes Alphabet’s X lab, self-driving unit Waymo and other non-Google companies.
Alphabet spent more than $10.3bn on research and development, nearly 14.8 per cent of its total sales in the third quarter. This was about 34 per cent more than the R&D expenditure for the same period in 2021.
“Financial results for the third quarter reflect healthy fundamental growth in Search and momentum in Cloud, while affected by foreign exchange," said ” Ruth Porat, chief financial officer of Alphabet and Google.
"We are working to realign resources to fuel our highest growth priorities."
YouTube added more than $7bn to Alphabet’s revenue, dropping around 2 per cent annually.
Google’s total acquisition costs stood at more than $11.8bn, up nearly 3 per cent on an annual basis, against analysts’ expectations of $12.3bn.
TACs are payments that search companies make to affiliates and online companies for bringing traffic to their websites. It is a major expense for companies such as Google and Yahoo.
Alphabet’s total cash, cash equivalents and marketable securities reached almost $116.3bn at the end of September, from $139.6bn at the end of last year.
To gain new customers, this month Google launched two new Pixel phones.
New devices come with enhanced camera features, improved machine learning capabilities and a return of facial-recognition technology, as the company vies with Apple and Samsung for more market share.
