Alphabet's recent earnings report revealed that the company failed to achieve its revenue target for the 3rd quarter. To make up for the lost revenue, Alphabet also announced that it would work towards decreasing the headcount growth.
If we talk about numbers, the expected EPS for Alphabet was $1.25, while the actual value is $1.06. Similarly, the overall revenue of Alphabet was expected to be $70.58 billion but turned out to be $69.09 billion. Part of that can be linked back to the shrinking advertising revenue of YouTube, which only earned $7.07 billion instead of the expected $7.42 billion.
Overall, the revenue growth of Alphabet slowed down to only around 6%, while it was around 41% just last year. Most of this drop in revenue growth is due to a decrease in online ad spending which makes up the bulk of Alphabet's revenue. If we compare these results with the historical performance, the revenue growth is at its lowest since 2013!
YouTube, which is also a major contributor to the company's ad revenue, also witnessed a slowdown... Overall, the actual revenue of YouTube was only $7.07 vs the expected value of $7.21 billion. Furthermore, analysts were actually expecting YouTube revenue to increase by 3%. So overall, the results of YouTube were disappointing for both the company and the shareholders.
However, the Chief Business Officer for the company shared something positive about the company... He said that Alphabet actually had an increase in search advertisements in certain areas. But this pullback in online ad spending will be enough to bring back the same growth witnessed in the last few years? That's a question that still remains to be answered, considering the difficult economic situations of the world.
In fact, the results are actually disappointing if we look at the earning reports from the big tech companies which focus on digital ads. Snap which is a major tech company, also had disappointing results and said that it couldn't deliver forecasts due to economic concerns. After the release of data, Snap stock dropped by almost 28%, which showed the investor's fears.