Alphabet ends Q1 in the black despite weaker ad revenue

Alphabet ends first quarter in the black despite weaker ad revenue

Google parent company Alphabet ended the first quarter of the year with a modest increase in earnings, hampered by slower ad revenues across the board.

In its first-quarter report, the search giant showed an increase of 13% in revenues over the same period in 2019. The report also showed that the company posted a net income of US$6.84 billion [AUS$10.44 billion] or a two-percent increase in net income from the same period last year.

Winners and losers

The company’s profits were buffered by an increase in revenue across almost all of its products. The biggest winners were Google Cloud and YouTube, with a 52.6% and 33.49% year-on-year increase, respectively.

Google‘s flagship products, on the other hand, underperformed. Search only went up by 8.67%, and advertising, 10.38%.

According to Alphabet CFO Ruth Porat, per Market Watch, the coronavirus pandemic dampened the advertiser spending during the first quarter.

“Performance was strong during the first two months of the quarter, but then in March we experienced a significant slowdown in ad revenues,” she said.

Ad revenues are down for Googe and YouTube

Still reliable for now

Search and advertising still brought in the most revenue for the company, however, with a growth of $1.95 billion for search and $3.18 billion for advertising.

The company is gearing up for a tougher second quarter, mainly due to the economic effects of the global coronavirus pandemic.

Investor confidence

The slower earning rate of advertising didn’t prevent investors from backing Alphabet in the stock market, however. The company’s stock price went up by as much as 7% after the company announced spending cuts for the year.

This is consistent with the company’s stock performance throughout the past 12 months, with an average growth of 2.8%.

Freeze hiring

Google earlier said it will also halt its global hiring spree, citing the ongoing COVID-19 pandemic as one of the reasons. Google CEO Sundar Pichai delivered the bad news to Google employees via a memo.

The executive said the “time is right for Google to slow down the pace of its global hiring” and focus on “recalibrating” the company’s investments.

For 2019, the company reportedly hired 20,000 employees across the globe. This is the same number that the company was targeting for 2019 up until the COVID-19 pandemic began shutting down businesses.

He also added that the pandemic is “hurting global businesses” and that Google is not immune to these adverse effects.

However, the executive added that Google will still continue to invest in other focus areas, including data centers and machines.

Images courtesy of Caio, Pixabay / Pexels

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