Alphabet earnings decline as online advertising momentum slows

Alphabet shares fell more than 6 per cent on Tuesday after the Google parent said earnings had slipped in the first quarter of 2022.

Alphabet’s revenue grew 23 per cent to $68bn in the three months to March, slightly below forecasts for $68.1bn, while net profits fell 8 per cent from $17.9bn a year ago to $16.4bn.

Traffic acquisition costs, a metric reflecting how much Google must spend to acquire web hits, jumped 23 per cent to $11.99bn, versus the $11.7bn expected by analysts, according to FactSet.

The results largely confirmed that momentum in online advertising has slowed as the global economy emerges from the coronavirus pandemic. A year prior, revenues had ballooned 34 per cent.

Revenue from Google Search, which accounted for 58 per cent of total revenues, was up 24 per cent from a year ago to $39.6bn.

YouTube revenues rose 14 per cent to $6.9bn, below the $7.5bn expected by analysts polled by Refinitiv. Google Cloud revenues grew 44 per cent to $5.8bn, matching forecasts, although it trailed the 46 per cent growth recorded by Azure, Microsoft’s rival cloud group.

Sundar Pichai, Alphabet chief executive, called the search and cloud results “strong” and said they reflected how people and businesses are both experiencing a digital transformation. “We’ll keep investing in great products and services, and creating opportunities for partners and local communities around the world,” he said.

Alphabet’s board also announced a $70bn share buyback plan, after spending $50bn on shares in 2021.