Alphabet only narrowly missed estimates for its quarterly revenue on Tuesday, a sign the tech giant may weather an industry-wide slowdown better than expected.
Alphabet reported second-quarter revenue of $69.69bn, 13% higher than same period a year ago and nearly in line with the average expectation of $69.88bn among investment researchers tracked by Refinitiv.
The news heartened Wall Street, with shares in the company up 3% after hours. The results gave investors hope that Alphabet’s search and advertising business might be able to withstand big countries potentially going into recession over the next year.
Still, Alphabet’s results marked the latest sign that tailwinds propelling big technology companies during the pandemic have shifted. The array of new challenges facing the industry has already caused the tech-driven Nasdaq composite index to plummet by 26% so far this year.
Alphabet’s report would mark impressive growth for most companies outside of tech. But it marked Alphabet’s lowest growth rate since the the April-June quarter of 2020, when the company suffered the only year-over-year revenue decline in its history.
In a call with investors on Tuesday, Alphabet’s chief financial officer, Ruth Porat, addressed the growing headwinds, saying it was difficult to make comparisons to the “significant growth rate” of the last year.
“There is uncertainty in the global economic environment and issues across the industry, whether it’s supply chain or inventory,” she said.
Google announced on 20 July it would implement a several-week hiring freeze, “to enable teams to prioritize their roles and hiring plans for the rest of the year”. The move was widely interpreted as a worrying sign, not only for Alphabet but also the wider industry, as tech giants’ behavior is often seen as an economic bellwether.
Despite the freeze, Alphabet did make a significant number of hires in the quarter, adding more than 10,000 employees from the end of March through June. The company ended the quarter with about 174,000 employees worldwide.
Porat addressed the hiring slowdown on the earnings call, saying the company would “continue hiring for critical roles, particularly focused on top engineering and technical talent” but that “the pace of headcount will moderate next year”.
In light of these changes, analysts had braced themselves for negative results from Alphabet, as rising inflation has influenced ad buyers to spend less on marketing. Alphabet, like others in the tech industry, has struggled to maintain the huge growth it saw during the pandemic when much of life moved online.
Fears were bolstered by recent difficult earnings reports from tech firms including Snap, Twitter and Netflix – many of which are also stopping or slowing hiring.
Overall profit was $16bn, or $1.21 per share, compared with the average estimate of $1.29 per share. Alphabet’s profit tends to be unpredictable due to sporadic gains or losses – at least on paper – in the stakes it holds in many startups.
Still, within the $602bn global online ad industry, Google is expected to maintain market share of 29%, or the biggest share for the 12th straight year, according to Insider Intelligence.
“With its tremendous market share in search advertising, Google is relatively well positioned to weather the rough waters that lie ahead as advertisers prioritize lower-funnel tactics,” said Evelyn Mitchell, an analyst at Insider Intelligence.
Reuters and the Associated Press contributed to this report