Google parent Alphabet missing estimates on YouTube, Europe ads


Google’s parent company, Alphabet Inc., reported first-quarter revenue that fell short of analysts’ expectations, a rare miss for the tech giant due to slower ad sales in Europe and a lackluster performance from its YouTube video service. Shares fell about 6% in extended trading.

The company also announced a $70 billion share repurchase program.

Sales, excluding payouts to distribution partners, rose 20% to $56 billion in the period ending March 31, Alphabet said in a statement Tuesday. Analysts expected an average of $56.1 billion.

Chief Financial Officer Ruth Porat said the company’s sales were impacted by the suspension of its commercial activities in Russia and wider unrest caused by the invasion of Ukraine.

“In addition, there was a small drop in ad spend in Europe,” she told Bloomberg TV. In addition, “there is a lot of uncertainty in the macro environment,” she said.

The company faced a tough year-ago quarter as it posted 32% growth in ad sales thanks to a return of commercial activity after the introduction of Covid-19 vaccines helped contain the virus and lifted exclusions. This year, Google’s ad sales grew 22% in the first quarter.

YouTube generated ad revenue of $6.87 billion, compared to the average analyst estimate of $7.4 billion. In previous quarters, Google has said that the ban of Apple Inc. third-party ad targeting has restricted some of its YouTube activity on iPhones. Ahead of earnings, Daniel Salmon, a BMO Equity Research analyst, cut YouTube sales estimates, in part due to increased competition from ByteDance Ltd’s TikTok video app. to reflect.

Google’s second-largest business line, the network system that serves ads elsewhere on the web, was likely constrained by new regulations in Europe restricting ad targeting. Total sales in Europe were up 19% year-on-year, but were down 12% from the fourth quarter.

Still, Google’s ad growth remains healthy, said Brian Wieser, global president for business intelligence at advertising agency GroupM. “Google is a third of the industry itself. They’re still growing north of 20%,” he said. “The problem is the expectations, not the company.”

Google’s search advertising business, the company’s main source of revenue, gained 24% to $39.6 billion. Cloud unit sales rose 44% to $5.82 billion. Both units exceeded estimates. In recent years, the Mountain View, California-based company has spent a lot of money on machinery and personnel to try and replace market leaders Inc. and Microsoft Corp. catching up in delivering computing power and storage over the Internet.

The quarter produced “strong growth in Search and Cloud in particular, helping both people and businesses as the digital transformation continues,” Chief Executive Officer Sundar Pichai said in the statement.

Alphabet’s Other Bets units — a hodgepodge of emerging companies including self-driving car company Waymo and Verily, which aims to solve various health problems with technology — produced $440 million in revenue on $1.16 billion in losses, though that’s a big improvement. was compared to the previous year.

Net income was $16.4 billion, or $24.62 per share, compared to $17.9 billion, or $26.29 per share, a year earlier. Analysts expected an average of $25.71 per share.

Shares of Alphabet fell to a low of $2,207.79 in extended trading after closing at $2,373 in New York. The stock was down about 14% this month.

(Updates with comments from CFO in the fourth paragraph.)

—With help from Emily Chang.

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