[Asia Economy Reporter Jeong Hyunjin] Alphabet, Google's parent company, recorded earnings below market expectations in the third quarter of this year (July to September) as concerns over a recession and rising inflation froze the advertising market. Following the disappointing earnings announcement, Google's stock price plummeted nearly 6%.
According to CNBC and other outlets on the 25th (local time), Alphabet announced in its earnings report that its third-quarter revenue this year was $69.09 billion (approximately 99.006 trillion KRW), a 6% increase compared to the same period last year. The market had forecasted Alphabet's third-quarter revenue to be $70.58 billion. Earnings per share also fell short of expectations at $1.06, compared to the market estimate of $1.25.
CNBC reported that the revenue growth rate, which was 41% just a year ago, significantly decreased in the third quarter of this year, marking the smallest growth since 2013, excluding the early stages of the pandemic.
The main reason Alphabet's earnings fell short of market expectations was the decline in advertising revenue. YouTube advertising revenue for the third quarter was $7.07 billion, down 2% year-over-year. The market had expected YouTube advertising revenue to increase by 3% year-over-year to $7.42 billion in the third quarter, but revenue actually decreased compared to a year ago. Alphabet's total advertising revenue, including YouTube, rose slightly by 2.5% year-over-year to $54.48 billion, driven by a modest increase in Google search ads.
Outside of advertising, Google's cloud division recorded $6.9 billion in revenue during the third quarter, surpassing market expectations of $6.69 billion. This represents a 37.6% increase compared to the third quarter of last year. However, like last year, Google Cloud posted an operating loss this year as well, with the loss widening from $644 million in the third quarter of last year to $699 million in the third quarter of this year.
Sundar Pichai, Alphabet's CEO, had already mentioned concerns about recession, rising inflation, interest rate hikes, and slowing advertising spending, and announced several cost-cutting measures. On the day of the announcement, he stated, "The company is focused on clearly setting priorities for products and businesses." Ruth Porat, Alphabet's CFO, said, "We are reallocating resources to ignite our highest growth priorities."
Following the earnings announcement, Google's stock price fell nearly 6% in after-hours trading.
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