Alphabet reports weak earnings and revenue on big YouTube miss

Sundar Pichai, chief executive officer of Alphabet Inc., gestures while speaking during a discussion on artificial intelligence at the Bruegel European economic think tank in Brussels, Belgium, on Monday, Jan. 20, 2020. Pichai urged the U.S. and European Union to coordinate regulatory approaches on artificial intelligence, calling their alignment critical.

Geert Vanden Wijngaert | Bloomberg | Getty Images

Alphabet reported weaker-than-expected earnings and revenue for the first quarter on Tuesday. The stock slid about 3% in extended trading.

Here are the results:

  • Earnings per share (EPS): $24.62 per share, vs. $25.91 expected, according to Refinitiv
  • Revenue: $68.01 billion, vs. $68.11 billion expected, according to Refinitiv
  • YouTube advertising revenue: $6.87 billion vs. $7.51 billion expected, according to StreetAccount
  • Google Cloud revenue:  $5.82 billion vs. $5.76 billion expected, according to StreetAccount
  • Traffic acquisition costs (TAC): $11.99 billion vs. $11.69 billion expected, according to StreetAccount

Google’s revenue came in at $68.01 billion, growth of 23% from the same period last year. That’s a slowdown from 34% growth in the first quarter of 2021, when the economy was reopening from the pandemic.

The company reported $54.66 billion in advertising revenue for the quarter — up from $44.68 billion the year prior.

YouTube ad revenue for the quarter fell short of analyst expectations. The video site was a particular beneficiary of the pandemic, when users were primarily at home on their devices. The miss also comes as TikTok captures a growing share of the social media video market.

CFO Ruth Porat said on the analyst call that YouTube experienced “modest growth” mostly in direct response ads. The deceleration primarily reflects tough comparisons to a strong first quarter of 2021, she said.

CEO Sundar Pichai said on the call that YouTube’s TikTok competitor called Shorts now has 30 billion daily views, which is double the amount of views the prior quarter and four times as many as the year before.

Google’s cloud business was a standout in the quarter, growing 44% and beating estimates as more big enterprises shift their workloads away from their own data centers. However, the cloud division is still losing money, reporting an operating loss of $931 million, compared to $974 million a year earlier.

During the quarter, Google halted much of its Russian operations due to the invasion of Ukraine. Revenue growth in the European region, which also includes the Middle East and Africa, slowed to 19% in the first quarter from 33% a year earlier.

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Alphabet’s Other Bets, which includes its life sciences companies and self-driving car unit Waymo, nearly doubled revenue from the year prior to $440 million from $198 million. The unit’s loss slightly increased to $1.15 billion.

Traffic Acquisition Costs (TAC), the metric used to show how much the company pays other websites to acquire traffic, came in higher than Wall Street expected at $11.99 billion.

Google’s other revenue segment, which includes hardware, Play Store, and non-advertising YouTube revenue, notched $6.81 billion, slightly higher than the prior year.

Alphabet’s stock is down 18% for the year as of Tuesday’s close. After hours, the shares fell to their lowest since May 2021.

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