Google’s advertising revenue slipped 4 per cent in the final quarter of last year, marking only the second quarterly contraction in the company’s history, according to figures released late on Thursday.
The advertising decline followed a sharp slowdown in Google’s business last year as economic growth weakened. It left parent Alphabet with overall revenue growth of only 1 per cent, compared to the 32 per cent surge in business it registered the year before.
The news pointed to an even sharper deceleration than many analysts had expected and left the company’s shares down 4 per cent in after-market trading.
Google also reported a slip in its operating profit margin as cost growth outran revenues, resulting in a 32 per cent fall in earnings per share, to $1.06. Wall Street had been expecting earnings of $1.18 a share.
The latest figures are likely to intensify Wall Street’s focus on Alphabet’s costs. Last month, it announced 12,000 job cuts, though it still came under fire from an activist investor for not taking more drastic action.
The company was “on an important journey to re-engineer our cost structure in a durable way and to build financially sustainable, vibrant, growing businesses across Alphabet”, chief executive Sundar Pichai said in a statement issued ahead of a call with analysts.
Alphabet said it expected to report a charge of $1.9bn-$2.3bn as a result of the job cuts and other cost-cutting moves, most of it in the first quarter of this year.
Revenue growth from cloud computing slowed to 32 per cent in the fourth quarter of last year, down from 38 per cent in the preceding three months and an even sharper deceleration than most analysts had expected. Advertising on YouTube, which is more exposed to an economic slowdown than the search business, fell 8 per cent after registering a 2 per cent decline in the third quarter.
Google’s first-ever revenue fall came at the start of the Covid-19 crisis, as many advertisers suspended their ad budgets, but growth rebounded strongly as digital spending boomed during the pandemic.
Source: Financial Times
