The Alphabet share price has shed 4% in after hours trading after Google’s holding company reported a slowdown in advertising revenue growth. After a stellar recent run of growth a slowdown was always likely and investors won’t be overly concerned. But while ad revenue from Google’s search engine continued to show strong growth and revenues at its AWS cloud computing business grew 44% to $5.82 billion, YouTube ad sales growth fell short of analysts’ expectations.
YouTube’s ad revenues were up 14% to $6.87 billion against $7.51 billion forecast by analysts. Competition from TikTok, especially popular with younger users, has been pinpointed as the main reason for YouTube’s slowed growth with high levels of inflation and supply chain issues causing advertisers to reconsider budgets also mentioned.
Despite the issues, Alphabet’s revenues were still up 23% to $68 billion in the first quarter, down from 34% over the same period a year earlier. However, net income was down by more than 8% to $16.4 billion.
As well as Google and YouTube, Alphabet also owns the Android smartphone OS, Waymo driverless vehicles technology company and a number of other companies in sectors including life sciences. But it still generates the bulk of its revenue from online advertising, making more from it than any other company, supporting a market capitalisation of $1.6 trillion.
Ruth Porat, Alphabet’s chief financial officer, told markets that the group was happy with its overall revenue growth for the quarter and plans to continue to make “considered investments” in R&D and personnel designed “to support long-term value creation for all stakeholders”.
Alphabet also announced an acceleration of its share buyback programme with $70 billion to be spent returning capital to shareholders. It will reacquire shares “from time to time” based on the stock’s price and “prevailing market conditions”.
Companies that earn most of their revenue from advertisers are expected to face a tougher environment over the next period as companies tighten their belts. Last week Snap failed to meet analysts’ expectations for revenue generated by Snapchat and attention will now turn to Facebook-owner Meta Platforms, which is due to post its quarterly earnings today.
Twitter, which has just agreed to be acquired by Elon Musk who is expected to take it private again, will publish its results tomorrow for what could be the last time for the foreseeable future.
