Google Earnings: Major Slowdown in Ad Sales Growth Reported Following Covid Pandemic Boom

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Sales from Google’s core advertising business hit $56 billion in the quarter ended June 30, the company announced Tuesday. This marks an 11.6% year-over-year increase, but this is a significant slowdown in the growth rate compared to the same quarter last year, during which it was posted a nearly 69% increase in ad revenue as it fueled a pandemic boom in online advertising.

Google also narrowly missed Wall Street analysts’ expectations for sales and earnings in the quarter. The company posted revenue of $69.7 billion in the quarter, an increase of 13% over the same quarter last year, forecasting the $69.9 billion forecast by analysts. Net income for the quarter fell more than 13% year-over-year to $16 billion, missing Wall Street estimates of $17.3 billion.

In a call with Wall Street analysts on Tuesday, Ruth Porat, Alphabet’s chief financial officer, pointed to “retreats in spending by some advertisers” due in part to economic uncertainty and “higher levels of engagement.” weak” with its products in relation to the pandemic.

Google’s google advertising is often seen as better insulated from economic issues than other online ad formats. Nevertheless, the difficult macroeconomic environment could continue to weigh on Google’s business in the coming quarters. Google earlier this month said it planned to slow its pace of hiring and rethink its investments for the rest of the year amid a slowing market and economic uncertainty.

“We are focused on hiring for engineering, technical and other critical roles…and working to increase productivity,” Alphabet CEO Sundar Pichai said on Tuesday’s call.

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“It’s a privilege to build technologies that are useful in good times and in uncertain times,” added Pichai.

A bright spot in Google’s earnings was an almost 36% year-over-year revenue increase from its cloud computing segment.

“While advertising spend will rise and fall over economic cycles, the global shift to cloud computing as the backbone of all digital activities – advertising, marketing and sales – is long-term,” said Tom Johnson, global chief digital officer of media agency Mindshare Worldwide, in a note to investors following Google’s earnings report.

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