By Paresh Dave and Munsif Vengattil
Alphabet shares held flat at $ 1,538.37 after it released second-quarter results, above this year’s pre-pandemic high of about $ 1,525.
With its mostly free tools for web browsing, video watching, and teleconferencing, Google has become an important part of many consumers’ lives during the pandemic, as shutdown orders compel people to trust on the Internet to work and entertain.
But advertisers at Google have suffered mass layoffs and other cuts during the pandemic, and marketing budgets are often the first to be cut, especially by big customers like travel search engines, airlines, and hotels.
Google’s ad business has long been with the overall economy, and the US economy contracted at its fastest pace since the Great Depression in the second quarter, the Commerce Department said Thursday.
Google seemed to overcome the slowdown better than before, as the pandemic has made the Internet more attractive to advertisers than television, radio, and other channels.
“This quarter, we saw the first signs of stabilization as users returned to online trading,” Alphabet Chief Executive Sundar Pichai told analysts on Thursday. “Of course, the economic climate remains fragile.” Alphabet’s second-quarter overall revenue was $ 38.3 billion, down 2% from the same period last year. Analysts tracked by Refinitiv, on average, had estimated a 4% decrease to $ 37,367 billion.
The decline in sales was the first since the company went public in 2004 and the worst performance since its 2.9% growth during the Great Recession in 2009.
About 66% of Alphabet’s revenue came from Google search and YouTube ads, 12% of ads sold on online partner properties, 8% of its cloud business, and 14% of its mobile app store and about a dozen other smaller companies.
It has been adjusted by slowing down the growth in expenses. Alphabet’s total costs and expenses increased approximately 7% from a year earlier to $ 31.9 billion in the second quarter, compared to a 12% jump a quarter ago.
Alphabet’s quarterly profit was $ 6.96 billion, or $ 10.13 per share, compared to the average analyst estimate of $ 5.645 billion, or $ 8.29 per share.
New data privacy laws, including one that went into effect this month in Google’s home state of California, are also depressing ad prices.
Antitrust regulators in the Americas, Europe and Asia are weighing whether Google has stifled competition on its way to dominate search, mobile software and other companies, and some agencies are even considering forcing it to ditch parts of its advertising operations.
Last month, some 2,000 employees asked Google’s emerging cloud business to close deals with some law enforcement agencies, citing racial discrimination concerns. And it’s uncertain if a wave of mass recruiting will win other cloud clients.
(Report by Paresh Dave in Oakland, California and Munsif Vengattil in Bangalore; Edition by Shailesh Kuber and Richard Chang)
