Google’s parent alphabet Inc.
had slower sales growth as the global economic turmoil disrupted digital advertising spending, which has already fallen to pandemic-driven heights.
The company said first-quarter sales rose 23% year-on-year, the lowest rate for the technology giant since late 2020. The company was experiencing at that time a period of massive sales growth as both small and large businesses flooded into the ad market seeking to win customers who spent the early period of the pandemic sequestered in their homes. The company’s sales rose 41% last year.
Rising inflation, supply chain disruptions, Russia’s war against Ukraine and other factors have weighed on the economic outlook and, analysts say, corporate appetite for spending on ads. Snap Inc.
said last week that this pressure affected its financial results in the last quarter and could affect the advertising market going forward.
Google’s search advertising – often more closely linked to specific customer purchasing decisions than to broader brand awareness campaigns – was less affected by the broader financial concerns. A recovery in travel as pandemic restrictions continued to ease helped support the company’s revenue growth, analysts said.
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Alphabet reported $ 68 billion in sales for the first three months, living up to Wall Street expectations. Net income, weighed down by accounting factors, fell 8.3% to $ 16.4 billion, below the consensus estimate from analysts surveyed by FactSet.
The shares of the company closed around 3% on Tuesday and retreated by more than 4% in late trading after announcing the results.
Alphabet reported strong top-line growth in its cloud computing business, trying to overtake Amazon.
com Inc. and Microsoft Corp.
The cloud business remains a heavy investment area for the company, and Google Cloud Services remains unprofitable.
Last month, Alphabet said it planned to spend nearly $ 5.4 billion on buying cybersecurity firm Mandiant Inc.
to better automate cyber defense by injecting specialized intelligence into one of the world’s largest platforms for cloud-based tools.
Cybersecurity investments have become something of an arms race among cloud service providers, with a rash of ransomware and other attacks driving customers’ concerns about data security. Microsoft, which also reported quarterly earnings on Tuesday, said revenue and profits rose as demand for its cloud services and software products continued to rise as the pandemic spurred more telecommuting.
Sales for Google Cloud increased to $ 5.8 billion from about $ 4 billion in the same period last year, resulting in an operating loss of $ 931 million.
YouTube, the Internet’s largest video destination, contributed $ 6.87 billion in sales in the first quarter. That compares with $ 7.87 billion in first-quarter revenue for streaming media service Netflix.
Inc. Alphabet has increased the cost of YouTube to maintain its lead in video by funding a TikTok alternative, YouTube Shorts, and adding live shopping.
Alphabet also said it would repurchase up to an additional $ 70 billion of some of its shares.
—Robert Wall contributed to this article.
Write to Meghan Bobrowsky at Meghan.Bobrowsky@wsj.com
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