Alphabet misses out on revenue as YouTube falls short Inflationary pressures on ad sales


YouTube ad revenue of $6.9 billion fell short of Wall Street’s target of $7.5 billion.

YouTube ad revenue of $6.9 billion fell short of Wall Street’s target of $7.5 billion.

Google parent Alphabet Inc on Tuesday reported first-quarter revenue came in below expectations as YouTube fell well short of Wall Street targets and ad sales were weighed down by supply chain and inflation concerns and the war in Ukraine.

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The world’s largest provider of search and video ads has been a big winner in the move to online commerce over the past two years, but the results suggest that in the latest economic phase of the pandemic, which has brought higher interest rates, is struggling with transportation costs and shortages of products from sofas to cars to baby food.

Alphabet shares lost 6.5% in after-hours trading.

“Alphabet is considered one of the most isolated companies in advertising compared to its peers, but sometimes you can still own the best house in the worst neighborhood,” said David Wagner, portfolio manager at Aptus Capital Advisors.

According to Factset, YouTube ad revenue of $6.9 billion fell short of Wall Street’s $7.5 billion target.

Google chief business officer Philipp Schindler said YouTube direct response ads grew more moderately during the quarter.

Alphabet said first-quarter revenue was $68.01 billion, up 23% year over year but below the median estimate of $68.1 billion by financial analysts tracked by Refinitiv, its first failure since the fourth quarter of 2019 before the pandemic. Alphabet’s total costs also rose 23%.

Analysts said that overall Google’s ad sales were in line with expectations, but YouTube’s advertising growth was lower than expected. Cloud sales grew more slowly than a quarter ago, and Google’s “other” revenue, which includes app, hardware and subscription sales, was $6.8 billion, down from estimates of $7.3 billion U.S. dollar.

Last week, Snap Inc warned that inflation, labor shortages and other economic challenges could weigh on ad revenue.

Facebook parent Meta Platforms Inc, the second largest online advertising platform with an expected 21.4% share of the global market in 2022, reports earnings on Wednesday. Its shares fell 3.3% on Tuesday according to Alphabet’s results.

According to Insider Intelligence, Google is expected to capture 29%, or the leading share, of the $602 billion global online advertising market in 2022, for at least the 12th consecutive year it has been at the top.

Product changes by Google to resolve antitrust concerns and increasing competition from companies like Inc and ByteDance’s TikTok are hurting ad sales. Google also cut advertising and other services in Russia following the first-quarter invasion of Ukraine.

Still, travel and entertainment advertisers are resurgent and are better positioned than rivals to withstand economic shocks, as Google’s advertising tools tend to be among the last to be abandoned by advertisers for their familiarity, ease of use, and more Users reach as alternatives .

Quarterly earnings were $16.44 billion, or $24.62 per share, falling short of expectations of $25.76 per share.

Though Alphabet’s stock is down over 17% this year through Tuesday, it’s up nearly 90% over the past two years.

Alphabet repurchased over $81 billion worth of stock over the past two years and announced Tuesday that its board has approved an additional $70 billion worth of buybacks.

High on the list of risks the company faces are numerous lawsuits and investigations into whether Google has engaged in anti-competitive behavior through its advertising and other businesses.

The latest scrutiny concerned the pending $5.4 billion acquisition of cybersecurity services provider Mandiant, which the US Department of Justice is closely scrutinizing. Google has announced that it will finalize the deal later this year.

Google Cloud, the unit that would contain Mandiant, grew its first-quarter revenue 44% year over year to $5.82 billion.

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