Alphabet (NASDAQ:GOOGL) shares took a significant nosedive on Wednesday after the Google (Google stock) parent company reported earnings for the third quarter that were lower than expected. This was due to slowing ad sales growth, which was similar to the warning that was issued by messaging app maker Snap (SNAP) the previous week.

Google Stock (GOOGL) Earnings

During the three months that ended in September, Google (NASDAQ:GOOGL) reported that revenues from YouTube, the company’s signature non-search platform, decreased by 2% to approximately $7.07 billion. CFO Ruth Porat stated that this change reflects a “pullback in spend by some advertisers,” which was something that was first noted during the previous quarter. Ad sales increased by only 2.5% to a total of $54.48 billion, while overall revenues increased by 6.1% to $69.1 billion, marking the worst growth rate since 2013.

Over the past week, messaging app-maker Snap issued a warning that its holiday quarter would see little to no revenue growth in the midst of a pullback in global ad spending. This forecast sent ripples through the social media space, causing competitors such as Twitter (TWTR), Pinterest (PINS), and Meta Platforms (META) to lose more than $40 billion in market value over the course of a single trading session.

In comparison to the prior year’s split-adjusted number of $1.39 per share, Google’s bottom line for the three months ended in September came in at $1.06 per share, a figure that fell short of the projections made by Wall Street by almost $1.25 per share.

When looking ahead to the last few months of the year, Porat predicted that a difficult comparative period in 2021 will weigh on ad revenue growth rates, which will also face additional headwinds from the strength of the United States dollar.

During the third quarter, “we did see a reduction in spend by some advertisers in some areas and search advertising,” Philipp Schindler, chief business officer, told investors on a conference call late Tuesday night. “We did see a decrease in expenditure by some advertisers in certain areas and search ads.” “For instance, within the realm of financial services, we observed a decrease in activity within the insurance, loan, mortgage, and cryptocurrency subcategories.”

He continued by saying, “There is no question that we are working in an unpredictable climate and that businesses of all sizes continue to be challenged in new and diverse ways, depending on where they are in the world.” “There is no question that we are operating in an uncertain environment.”

In early trading on Wednesday, Alphabet shares were marked 7.5% down to change hands at $96.66 per. Such a move would bring the stock’s year-to-date fall to around 33.5%.

Porat stated that the reduction in expenditure, in conjunction with larger economic challenges, would mean that the company’s previous plans to scale down the rate at which it was employing “will become more obvious in 2023.”

According to Porat, Google (NASDAQ:GOOGL) recruited 12,765 individuals to its worldwide staff during the previous quarter, 2,600 of which came from the company’s acquisition of the cloud business Mandiant.

JMP Securities analyst Andrew Boone, who has a market perform’ rating on the stock and a price target of $145, stated that “while this is not a change in thesis for Alphabet itself, it is a warning sign to us that digital advertising this quarter may be weaker than we initially thought as search on a 3-year revenue comparison.” Boone has a $145 price target, and a market perform’ rating on the stock.

AI is improving results for advertisers, YouTube is taking a share of linear TV budgets, and GCP should win more IT budgets from ongoing cloud growth, he added. “While we acknowledge the tough macro environment, our belief that Alphabet remains well positioned across most major digital secular growth trends is unchanged.” “While we acknowledge the tough macro environment, our belief that Alphabet remains well positioned across most major digital secular growth trends is unchanged.” We would take advantage of any dip in share price since we are committed to maintaining our expenditure control into the following year, and our share repurchases are at an all-time high.

Featured Image-  Megapixl @ Miluxian

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