Google-parent Alphabet reported September-quarter profit and revenue that missed estimates as its core digital advertising business fell short of lowered expectations. GOOGL stock plunged on the Google earnings news as YouTube ad revenue fell.
The internet search giant released the Google earnings report after the market close on Tuesday. Google said third-quarter profit fell 24% to $1.06 per share. The company reports earnings under generally accepted accounting principles, also known as GAAP.
Gross revenue rose 6% to $69.09 billion amid headwinds from currency exchange rates. In the year-earlier period, Google revenue rose 41%.
Analysts had predicted Google earnings of $1.26 per share on revenue of $71 billion. A year earlier, Google reported earnings of $1.40 per share on revenue of $65.1 billion.
"Google reported an across-the-board miss on Q3 advertising as search, YouTube, and the ad network were all softer than expected, partially offset by a top-line beat at cloud," said Cowen analyst John Blackledge in a report.
He added: "Management cited tough (year-over-year) comparisons, a pull-back by some advertisers and worse FX (currency exchange rates)."
GOOGL stock sank 9.1% to close at 94.93 on the stock market today. With Wednesday's loss, the big-cap tech stock has retreated 36% in 2022.
GOOGL Stock: YouTube Revenue Falls
YouTube ad revenue fell nearly 2% to $7.07 billion amid increased competition from TikTok. GOOGL stock analysts had estimated YouTube ad revenue of $7.5 billion, up 3.5%.
"While we remain bullish on YouTube's multi-year revenue opportunity around Shorts and its internet TV leadership, these products may take time to ramp and meaningfully inflect YouTube given GOOGL's focus on engagement over monetization and the weaker macro environment," said Morgan Stanley analyst Brian Nowak in a report.
Meanwhile, overall Google advertising revenue rose 2.5% to $54.48 billion, missing estimates of $56.58 billion.
Google said cloud-computing revenue rose 37% to $6.87 billion, edging by estimates of $6.7 billion.
Alphabet repurchased $15.39 billion of its own stock, about the same as in the June 2022 quarter.
Google said it will slow hiring in the December quarter and in 2023. Google had 186,779 employees as of Sept. 30, up 24% from a year earlier.
Alphabet's capital expenditures grew 7% in Q3 to $7.3 billion.
"It's surprising to us that Google continued to hire and invest aggressively throughout Q3, knowing that macro trends were deteriorating," said EvercoreISI analyst Mark Mahaney in a report.
GOOGL stock holds a Relative Strength Rating of 46 out of a best-possible 99, according to IBD Stock Checkup.
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