Alphabet only narrowly missed its quarterly revenue estimates on Tuesday, a sign that the tech giant may weather an industry-wide slowdown better than expected.
Alphabet posted second-quarter revenue of $69.69 billion, up 13% from the same period a year ago, and nearly in line with the average expectation of $69.88 billion. dollars from investment researchers tracked by Refinitiv.
The news comforted Wall Street, with shares of the company up 3% after hours. The results gave investors hope that Alphabet’s search and advertising business may be able to withstand major countries likely to enter recession in the next year.
Still, Alphabet’s results marked the latest sign that the tailwinds propelling big tech companies during the pandemic have shifted. The array of new challenges facing the industry has already sent the Nasdaq tech-focused composite index down 26% so far this year.
Alphabet’s report would mark impressive growth for most companies outside of technology. But it marked Alphabet’s lowest growth rate since the April-June quarter of 2020, when the company suffered the only year-over-year drop in revenue in its history.
In a call with investors on Tuesday, Alphabet’s chief financial officer Ruth Porat spoke of the growing headwinds, saying it was difficult to draw comparisons with last year’s “significant rate of growth”. .
“There is uncertainty in the global economic environment and issues across the industry, whether it’s supply chain or inventory,” she said.
Google announced on July 20 that it would implement a multi-week hiring freeze, “to allow teams to prioritize their roles and hiring plans for the remainder of the year.” The move was widely interpreted as a worrying sign, not just for Alphabet but for the industry as a whole, as the behavior of tech giants is often seen as an economic indicator.
Despite the freeze, Alphabet made a significant number of hires during the quarter, adding more than 10,000 employees from late March through June. The company ended the quarter with approximately 174,000 employees worldwide.
Porat spoke of the slowdown in hiring during the earnings call, saying the company “will continue to hire for critical positions, particularly focused on top technical and engineering talent,” but that “the pace workforce will moderate next year”.
In light of these changes, analysts had braced for negative results from Alphabet, as rising inflation prompted ad buyers to spend less on marketing. Alphabet, like others in the tech industry, has struggled to sustain the huge growth it has seen during the pandemic, when much of life moved online.
Fears have been heightened by recent reports of tough results from tech companies such as Snap, Twitter and Netflix – many of which are also halting or slowing hiring.
Overall earnings were $16 billion, or $1.21 per share, versus an average estimate of $1.29 per share. Alphabet’s earnings tend to be unpredictable due to sporadic gains or losses – at least on paper – in the stakes it holds in many startups.
Yet in the $602 billion global online advertising industry, Google is expected to retain a 29% market share, the largest share for the 12th consecutive year, according to Insider Intelligence.
“With its huge market share in search advertising, Google is relatively well positioned to weather the choppy waters ahead as advertisers favor low-funnel tactics,” said Insider Intelligence analyst Evelyn Mitchell.
Reuters and the Associated Press contributed to this report