Google’s revenue growth during the past quarter has decelerated to its slowest pace in two years as advertisers reined in their spending amid intensifying fears of an economic recession.
Net income at the company fell 14 percent year-over-year to $16 billion in the latest quarter, but the flow of online ad dollars that fuels the company's fortunes has slowed as inflation, conflict and other troubles vex the overall economy.
"Google's earnings miss this quarter proves it's not immune to the challenges facing the digital advertising industry at large," said analyst Evelyn Mitchell.
The regression reported on Tuesday by Google’s corporate parent, Alphabet, is the latest sign that the tailwinds propelling big technology companies during the pandemic have shifted.
Alphabet’s revenue during the April-June period totaled $69.7 billion, a 13 percent increase from the same time last year.
That would be impressive growth for most companies outside of tech. But it marked Alphabet’s lowest growth rate since the April-June quarter of 2020, when the company suffered the first, and so far only, year-over-year revenue decline in its history.
The more sluggish spending was especially evident at YouTube, which rose by 5 percent from the previous year during the second quarter, the lowest rate of year-over-year quarterly growth since Alphabet began to disclose the video site’s financial results in late 2019.
Uncertainty over 'pullbacks'
The rally gained momentum after Alphabet CEO Sundar Pichai and other top executives assured analysts during a late Tuesday conference call that the company intended to be more judicious about its spending in the months ahead.
“Personally, I find moments like this clarifying," Pichai explained during the call. “It gives us a chance to look at everything we do through a critical lens."
The second-quarter results reflect greater caution among digital advertisers are remaining cautious as the Federal Reserve contemplates more aggressive action — meaning higher interest rates — to bring down the highest inflation in more than 40 years, a mission that threatens to drag the economy into a recession. The next rate increase is expected on Wednesday.
“We use the term ‘uncertainty' because that is the best way to characterise what we are seeing,” chief financial officer Ruth Porat said during a conference call with analysts late Tuesday.
She also acknowledged Google has been affected by “pullbacks" among an unspecified number of advertisers.
Google already began girding for potential recession by recently announcing plans to slow hiring and then went even further by imposing a two-week freeze on extending job offers to candidates.
Alphabet, with more than 174,000 employees worldwide, has recruited throughout the pandemic, but it recently announced a slowdown in hiring for the rest of the year./agencies
