Google may be settling into a period of more modest growth, as concerns about a slowing economy and rising inflation have taken a toll on online advertising.
Google’s parent company, Alphabet, reported on Tuesday a net profit of $16 billion in the second quarter, down 14 percent from a year earlier, while revenue climbed 13 percent to $69.7 billion. The earnings were below analysts’ estimates of $17.5 billion in profit on $69.9 billion in revenue, according to data compiled by FactSet.
Even with the financial cushion of its popular products, Google must contend with a raft of uncertainties that have roiled global markets in recent months. These include slowing economic growth and rising inflation in the United States and other major economies, which influence advertising budgets and consumer behavior — both crucial to Google’s business. The company must also navigate effects from a persistent pandemic and Russia’s invasion of Ukraine.
Alphabet, known for its rapid personnel expansions, has exercised caution in response to the macroeconomic environment, saying it will slow hiring for the rest of the year and put a priority on the roles it needs.
Shares of Alphabet rose 2 percent in after-hours trading.
Ruth Porat, Alphabet’s chief financial officer, had warned that growth may appear more modest because of unfavorable comparisons in the second quarter. In the previous spring, financial results heralded a recovery in comparison with the early days of the pandemic, when advertisers were spooked. The most recent quarter also reflected the company’s decision to halt business in Russia because of the war. In 2021, Russia contributed 1 percent to Google’s total revenue.
Despite the slowdown, the company’s search engine remains a crucial gateway to the internet, letting it sell billions in ads as long as people continue using its services. It owns the most popular destination for online videos, YouTube, whose ad revenue grew 5 percent in the three months that ended on June 30, to $7.3 billion.
The company’s search ads grew 13.5 percent, proving more resilient than YouTube, which Google has said was affected by Apple’s app privacy changes.
Alphabet said it now had 174,014 employees, an increase of more than 10,000 from the figure it reported in April. Like many of its peers, the company has since said it will slow hiring because of a weakening economic landscape.
Google’s cloud computing unit posted a 36 percent increase in revenue, though it lost $858 million in the second quarter. A year earlier, the division posted a loss of $591 million. The unit still lags behind rival services from Amazon and Microsoft.