Decline in profits for Google parent Alphabet - advertising business grows

At the same time, the online giant demonstrated that it is well positioned to weather the market downturn better than smaller competitors.

Growing advertising business

Alphabet's quarterly profit fell year-on-year from $18.5 billion to $16 billion, the company announced Tuesday after the U.S. stock market closed. Revenue increased 13 percent to $69.7 billion. The group's most important division - Google's advertising business - grew 11.6 percent year-on-year to $56.3 billion.

With high inflation and a weakening economy, a downturn in online ad spending is on the horizon as companies put the brakes on costs. Video app Snapchat felt the impact, with its slowest growth rate yet.

One question is whether the two giants Google and Facebook will also feel the chill - or whether their size and efficiency will make them more attractive to advertisers, especially in the current situation.

Business with advertising in the environment of Google's Internet search grew by 13.5 percent year-on-year to around $40.7 billion. Revenues on the YouTube video platform grew more slowly than before by 4.8 percent to a good 7.3 billion dollars.

Chief Financial Officer Ruth Porat pointed out that the prior-year quarter had been exceptionally strong, with the upswing following the easing of initial pandemic restrictions. At the same time, she acknowledged that some advertisers were cutting back on spending.

Google services operating profit grew only from $22.34 billion to $22.77 billion. Headwinds are expected to continue in the current quarter, Porat said.

Expensive catch up

The race to catch up with Amazon and Microsoft in the cloud business continues to cost Google a lot of money. While the division's revenue grew by 35.6 percent to just under $6.3 billion, its operating loss increased by 45 percent to $858 million.

Although some analysts' expectations were missed, investors were pleased, sending Alphabet shares up 4.8 percent in after-hours trading. Snapchat company Snap's share price, on the other hand, had plunged by more than a third last week following disappointment over its weakened growth.

"I think it's a good moment to sharpen our focus," Google and Alphabet chief Sudar Pichai said in a conference call with analysts. The group will continue to think long-term and invest in artificial intelligence, among other things, he said.

Revenue from the so-called "other bets" under the Alphabet umbrella, such as robot car company Waymo, stagnated at $193 million. At the same time, the division's operating loss grew from $1.4 billion to nearly $1.7 billion. At Waymo, Alphabet is currently investing in building a robot cab service, including in San Francisco. (SDA)