Like fellow tech behemoth Microsoft, Google parent Alphabet missed Wall Street estimations too, as it reported its performance in the second quarter of the year. And surprisingly, its profits continued to fall even though it generated more amounts in revenue in the quarter. Relief however came in from its ever-present Ads business, with Google search ads in particular showing strong growth despite globally uncertain advertising trends.
In Q2 2022, the Google parent brought in $69.68 billion in revenue, a slow rise of 13%, and an increase from the $61.8 billion in clocked in Q2 2021. Its operating income for the quarter rose to $19.45 billion, while its net income for the same period fell to $16 billion. Its diluted earnings per share (EPS) came at $1.21 for the quarter.
Like Microsoft, these numbers fall short of analyst estimates. Wall Street estimated that Alphabet would generate $69.9 billion in revenue and clock $1.28 in EPS.
“Our consistent investments to support long-term growth are reflected in our solid performance in the second quarter, with revenues of $69.7 billion in the quarter, up 13% versus last year or 16% on a constant currency basis. We are focused on responsible capital allocation in support of our growth opportunities,” said Ruth Porat, CFO of Alphabet and Google.
Let us see how Google’s segments performed during a tough quarter, which saw the company resort to freezing recruitments amidst an economic downturn. Advertising continues to make up a big chunk of the revenue, accounting for $56.3 billion, a growth of 12%.
Breaking this up, we find that the “Google Search & other’ section brought in $40.7 billion in revenue, while advertisements on YouTube and Google Network contributed $7.3 billion (the slowest growth in over 20 years and below analyst expectations of $7.52 billion) and $8.25 billion respectively. Google’s Other Bets segment, which includes self-driving car unit Waymo, rose by $1 million year-over-year to $193 million.
CEO Sundar Pichai said, “In the second quarter our performance was driven by Search and Cloud. The investments we’ve made over the years in AI and computing are helping to make our services particularly valuable for consumers, and highly effective for businesses of all sizes. As we sharpen our focus, we’ll continue to invest responsibly in deep computer science for the long-term.”
Google Cloud performed well by clocking a rise of nearly $2 billion to reach $6.27 billion, but fell short of revenue expectations of $6.41 billion. Its Traffic Acquisition Cost (TAC) for the quarter came to $12.2 billion (falling short of the estimated $12.41 billion), while its employees increased from 144,056 to 174,014 year-over-year.
“Going forward, the very strong revenue performance last year continues to create tough comps that will weigh on year on year growth rates of advertising revenues for the remainder of the year,” Porat said on the earnings call, while the company did not provide a revenue forcast.
