BUSINESS + ECONOMY

Google’s core business is slowing down amid recession fears

Oct 26, 2022, 6:00 AM
Google CEO Sundar Pichai speaks during a signing ceremony in Dallas, Texas, in October 2019. Google...
FILE PHOTO: Google CEO Sundar Pichai speaks during signing ceremony committing Google to help expand information technology education at El Centro College in Dallas, Texas, U.S. October 3, 2019. REUTERS/Brandon Wade/File Photo

(CNN) — Google may be the giant in the digital advertising world, but even it is not immune to the impact that the economic downturn and recession fears are having on the online ad market.

Google parent company Alphabet on Tuesday reported earnings results for the third quarter that fell short of Wall Street analysts’ estimates for both sales and profits, due in large part to a sharp slowdown in the growth of its core advertising business.

It reported revenue of nearly $69.1 billion, up just 6% from the same period in the prior year. Google’s advertising revenues grew just 2.5% year-over-year, compared to the 43% growth it posted a year ago. YouTube’s ad business, which competes with TikTok, was especially hard hit, with revenue declining nearly 2% from the year-ago quarter.

Google’s net income, meanwhile, came in at $13.9 billion, down more than 26% from the year prior and well below the $16.6 billion analysts had projected.

The company’s shares fell 6% in after-hours trading Tuesday following the report.

Sundar Pichai, CEO of Alphabet and Google, nodded to the tougher economic climate in a statement included with the results.

“We’re sharpening our focus on a clear set of product and business priorities,” Pichai said. “We are focused on both investing responsibly for the long term and being responsive to the economic environment.”

Tech companies, including Google, reported that they’d started to feel the impact of declining online ad spending in the prior quarter. High inflation, looming recession fears and the ongoing war in Ukraine have all continued to weigh on the industry.

Growth in other areas of Google’s business also appear to be slowing. Google Cloud revenue grew 37% year-over year, a deceleration from the nearly 45% growth it posted in the year-ago quarter, and the segment’s net loss increased to $699 million from $644 million during the same quarter last year.

Net loss from Google’s “Other Bets” segment, which includes business efforts such as its self-driving car unit Waymo, also accelerated year-over-year during the quarter to $1.6 billion.

“Google delivered a disappointing quarter with the search giant underperforming our expectations across almost all business units, most importantly its core ad search segment,” said Investing.com Senior Analyst Jesse Cohen.

During a call with analysts Tuesday, Pichai said the company has begun “realigning resources to invest in our biggest growth opportunities.”

“Over the past quarter, we have made several shifts away from lower priority efforts to fuel highest growth priorities,” Pichai said, adding that the company plans to cut back on headcount additions during the final three months of the year.

Google CFO Ruth Porat said on the call that strong growth in the fourth quarter of 2021 will make year-over-year ad revenue growth comparisons to the current quarter difficult, and that the strength of the US dollar is expected to increasingly weigh on the company’s results. The company did not provide detailed financial outlook for the current quarter.

Today’s Top Stories

Business + Economy

Both Utah rail workers and Utah farmers expressed relief that a threatened rail strike was averted ...
Hugo Rikard-Bell

Union Pacific, Utah farmers, relieved threat of strike has passed

Union Pacific Railroad representatives said claims about days off, made by workers threatening to strike, were outright false.
2 days ago
The owners of long-time local favorite, Hell's Backbone Grill and Farm, thought they would have to ...
Hugo Rikard-Bell

Fiercely self-sufficient Hell’s Backbone cafe owners turn to public for help

The Hell's Backbone Grill and Farm owners were persuaded by friends and supporters to not give up. It looks to have worked.
2 days ago
A new Utah population estimate finds that most of the people that moved to or within Utah between J...
Simone Seikaly

Utah population update: 60K+ people have moved here since 2021

The Utah population spike noted this year is the greatest increase in 16 years. However, growth is expected to decline going forward.
2 days ago
Help wanted sign is displayed in Deerfield, Ill., Wednesday, Sept. 21, 2022.  The number of availab...
Alicia Wallace, CNN Business

US economy added a robust 263,000 jobs in November

The unemployment rate held steady at 3.7%, according to the latest monthly jobs snapshot from the Labor Department, released Friday morning.
2 days ago
making way for The Point, a guard tower is knocked down as part of the old state prison's demolitio...
Aimee Cobabe

As the old state prison goes down, development of The Point begins

The Point will take about two decades for developers to finish, but leaders in the project are optimistic that the planned community will be worth the wait.
4 days ago
Former Governor of Utah, Gary Herbert speaks at the start of demolition at the old Utah State Priso...
Aimee Cobabe

Demolition begins at the old Utah State Prison in Draper

It took years to get the Utah State Prison to this point. Now, the site will be repurposed and built into a so-called "15-minute community."
5 days ago

Sponsored Articles

Spicy Homemade Loaded Taters Tots...
Macey's

5 game day snacks for the whole family (with recipes!)

Try these game day snacks to make watching football at home with your family feel like a special occasion. 
Happy joyful smiling casual satisfied woman learning and communicates in sign language online using...
Sorenson

The best tools for Deaf and hard-of-hearing workplace success

Here are some of the best resources to make your workplace work better for Deaf and hard-of-hearing employees.
Team supporters celebrating at a tailgate party...
Macey's

8 Delicious Tailgate Foods That Require Zero Prep Work

In a hurry? These 8 tailgate foods take zero prep work, so you can fuel up and get back to what matters most: getting hyped for your favorite
christmas decorations candles in glass jars with fir on a old wooden table...
Western Nut Company

12 Mason Jar Gift Ideas for the 12 Days of Christmas [with recipes!]

There are so many clever mason jar gift ideas to give something thoughtful to your neighbors or friends. Read our 12 ideas to make your own!
wide shot of Bear Lake with a person on a stand up paddle board...

Pack your bags! Extended stays at Bear Lake await you

Work from here! Read our tips to prepare for your extended stay, whether at Bear Lake or somewhere else nearby.
young boy with hearing aid...
Sorenson

Accommodations for students who are deaf and hard of hearing

These different types of accommodations for students who are deaf and hard of hearing can help them succeed in school.
Google’s core business is slowing down amid recession fears