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Alphabet’s ad revenue from YouTube tanks by 2% against market expectations. The GOOGL stock price has slipped once again under $100 this year.
During the aftermarket trading session on Tuesday, October 24, shares of Alphabet (NASDAQ: GOOGL) dropped nearly 7% on weaker-than-expected Q3 2022 earnings.
Alphabet and Its Performance in Q3 2022
The company’s revenue growth slowed to 6% from 41% a year ago as the company sees a major dip in online ad spending. This also turns out to be the weakest period of growth for the company since 2013. Alphabet’s earnings per share stood at $1.06 vs. the $1.25 expected. Also, the revenue stood at $69.09 billion vs. the $70.58 billion expected.
Surprisingly, YouTube ad revenue tanked 2% to $7.07 billion from $7.21 billion a year before. However, the analysts were expecting an increase of 3%. During the third quarter, the overall advertising revenue for Alphabet was $54.48 billion.
Dissecting the sector-wise performance, 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.
In the aftermarket trading on Tuesday, the GOOGL stock price slipped under $100 to $97.60. So far, the lowest close for the year is $95.65 on Sept. 30. Alike other Big Tech companies, Alphabet has taken a massive beating on Wall Street. The GOOGL stock price is already down by 28% over the last year massively underperforming the Nasdaq.
One area where Google saw strong improvement was its cloud business. For the third quarter, Google Cloud brought revenue of $6.7 billion, more than analysts’ expectations. This is a notable increase from the $5 billion a year ago.
Initiating Some Cost Cutting Measures
During Tuesday’s earnings call, Alphabet executives spoke about the major challenges that the company is facing. Alphabet CEO Sundar Pichai said that the company is “sharpening our focus on a clear set of product and business priorities”.
He further added that the company will be initiating some cost-cutting measures amid rising economic challenges and the foreseeable recession. Earlier in September, Pichai said that he wants to make the company 20% more effective. This would involve slashing jobs and product cuts.
Alphabet’s current headcount currently stands at 186,779 – up from 150,028 last year. However, Pichai added that during the fourth quarter, the headcount additions will be “significantly lower” 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,” added Pichai.