MOUNTAIN VIEW, California: Google parent Alphabet reported its first quarterly revenue decline since the fourth quarter of 2019 before the COIVID-19 pandemic.
Russia’s invasion of Ukraine, along with the global economic downturn, has negatively affected YouTube ad sales and left investors concerned.
As the pandemic has forced more shops and people online, the world’s largest provider of search and video made substantial profits over the last two years, but due to the war in Ukraine, rising inflation and product shortages causing advertisers to dump marketing campaigns, sales are proving difficult this year, analysts said.
It was too early to predict when sales slowed by the war might pick up, said Alphabet Chief Financial Officer Ruth Porat, warning that the strengthening U.S. dollar would further affect sales in the current quarter.
Meanwhile, Alphabet shares, which were up nearly 90 percent over the past two years, have fallen about 2.5 percent.
“Alphabet has been seen as one of the most insulated companies in the advertising space relative to peers, but sometimes you can still own the best house in the worst neighborhood,” said David Wagner, portfolio manager at Aptus Capital Advisors, as reported by Reuters.
According to Alphabet, its first-quarter sales rose to $68.01 billion, up 23 percent from last year but below the average estimate of $68.1 billion among financial analysts.
FactSet stated YouTube advertising sales of $6.9 billion missed analysts’ target of $7.5 billion.
“Russia’s invasion of Ukraine that began during the quarter had an outsized impact on YouTube revenue because the company stopped ad sales in Russia and brand advertisers, particularly in Europe, pulled back on spending after fighting broke out,” Porat said.
In 2021, Google overall derived 1 percent of its sales from Russia, she added, noting that app store fee cuts due to new antitrust legislation had wiped out subscription revenue gains.
The value of Google’s other sources of revenue, including app, hardware and subscription sales, were $6.8 billion, below estimates of $7.3 billion, while quarterly profits were $16.44 billion, or $24.62 per share, below the $25.76 per share expectations.
In a note, Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said that while Alphabet is still indispensable to consumers and advertisers, the macro environment could bring some ups and downs.
