US Alphabet profits down 34%, YouTube revenue declines for 2 consecutive quarters

Google’s holding company, Alphabet, announced its financial results for the October-December 2022 period on February 2, 2023, US time. Although sales increased by 0.9% year-on-year to $76.048 billion (about ¥9.79 trillion), net income fell by 34.0% year-on-year to $13.624 billion. This is the fourth consecutive quarter of decline in profits. Earnings per share were $1.05, compared with $1.53 in the same period last year. Both fell short of market expectations, and the company’s stock fell 6% in after-hours trading.

 “After a significant acceleration in digital spending following the pandemic, it’s clear that macroeconomic conditions are tightening,” Alphabet CEO Sundar Pichai said on an earnings call. Showed recognition of the current situation.

 ”The growth rate has returned to the recession period (after the Lehman shock). Is there any sign of bottoming out?” In response to questions from analysts on the earnings call, Ruth Porat, Chief Financial Officer, said: “We are not going to make predictions about the world situation. Most importantly, we need technology innovation to help advertisers and cost structure reforms that enable sustainable value creation.”

Alphabet's 2022 October-December sales by division
Alphabet’s 2022 October-December sales by division
(Source: U.S. Alphabet)
[Click image to enlarge]

 By segment, the decline in advertising revenue is remarkable. The company’s main Internet advertising business posted sales of $59.042 billion, down 3.6% year-on-year.

 Of that, ads linked to Internet searches were $42.604 billion, down 1.6% year-on-year. YouTube advertising has been particularly hard hit. Sales decreased by 7.8% year-on-year to $7.963 billion, marking the second consecutive quarter of decline.

 The company disclosed quarterly YouTube sales from the October-December period of 2019 three years ago, but the July-September period of 2022 is the first time that sales have decreased. YouTube, which was a growth driver for Alphabet’s advertising business, has changed in the last six months.

 Philip Schindler, CBO (Chief Business Officer) of Google, said about YouTube, “There was a headwind in the October-December period of 2022.” “We are confident in our long-term prospects,” he said, by strengthening services for customers and investing in subscription services.

 For YouTube Shorts, creators can receive ad allocation from February 1, 2022. By increasing the means of monetization, it plans to compete with Chinese rivals TikTok of ByteDance and Instagram of US Meta (Meta, formerly Facebook).

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