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Alphabet (GOOGL) Stock in Downslide, Loses 9% after Disappointing Earnings Report

UTC by Bhushan Akolkar · 3 min read
Alphabet (GOOGL) Stock in Downslide, Loses 9% after Disappointing Earnings Report
Photo: Sundar Pichai / Twitter

The GOOGL stock sees its worst daily performance since March 2020 as the company delivers disappointing revenue growth for the third quarter of 2022.

On Wednesday, October 26, shares of Alphabet (NASDAQ: GOOGL) tanked by a staggering 9% closing all the way under $95. This price slide in the GOOGL stock comes after Alphabet released its third-quarter earnings earlier on Tuesday. Wednesday also turned out to be the worst day for GOOGL stock performance after March 2020.

Alphabet (GOOGL) Q3 Earnings

The tech giant reported its weakest quarterly growth in almost a decade since 2013. Alphabet’s revenue growth has slowed down to 6% from 41% a year ago. This comes as Alphabet faces the heat of a sharp downtrend in online ad spending.

During the third quarter of 2022, Google’s overall advertising revenue stood at $54.48 billion. The YouTube ad revenue surprises sliding over 2% down to $7.07 billion from $7.21 billion a year ago. However, some analysts were expecting a 3% surge in YouTube ad revenues during the last quarter.

Analysts at Bernstein continue to maintain an outperform rating for Google stock. However, the shared concerns with Google’s decelerating ad revenues. Bernstein said that the company has become “increasingly uncomfortable” over the last six months. “Google is an ad business first, and digital ads is no longer a safe place to hide,” they added.

Philipp Schindler, chief business officer for Google, said that Alphabet saw a pullback in spending on search ads, especially in areas such as loans, insurance, mortgage, and cryptocurrencies.

Alphabet Consolidating Operations

Alphabet’s third-quarter earnings report has given a disappointing start to the Big Tech earnings this week. On Wednesday, Facebook-parent Meta (NASDAQ: FB) also reported another quarter of revenue decline with the FB stock price crashing 19% in the aftermarket hours.

Alphabet is now eyeing some rejig in the coming quarters to consolidate its operations. Alphabet CEO Sundar Pichai said that the company will significantly lower hiring during the fourth quarter this year. He added: As the company becomes “focused on moderating operating expense growth, our actions to slow the pace of hiring will become more apparent in 2023. Talent is the most precious resource”.

Analysts at Raymond James continue to maintain an outperform rating for the company. The analysts are positive about Alphabet’s long-term ad revenue growth and Google Cloud momentum. They also added that Google’s decision to decelerate hiring will improve the company’s margins going ahead. In a note to investors on Wednesday, the analysts wrote:

“GOOGL talked about more hardware spending going forward. GOOGL and META are both spending more capX and op Ex on hardware, which implies lower [Return on Invested Capital] than in the past when GOOGL was predominantly a software and advertising biz”.

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