Google Parent Company Alphabet's Revenue Growth Hits 2-Year Low... But Stock Rises 4%, Why?

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Alphabet, Google's parent company, recorded its slowest growth in two years due to concerns over an economic recession, a slowdown in the digital advertising market, and the impact of a strong dollar. However, as evaluations continued that it showed a more resilient performance than expected amid the harsh economic environment, Alphabet's stock price rose more than 4% in after-hours trading.

According to the Wall Street Journal (WSJ) and others on the 26th (local time), Alphabet announced in its earnings report that its revenue for the second quarter (April to June) was $69.69 billion (approximately 91.36 trillion KRW), a 13% increase compared to the same period last year. The revenue growth rate was the lowest since the second quarter of 2020, when it was hit directly by COVID-19. In the second quarter of last year, consumer spending increased due to the easing of social distancing measures after the pandemic, resulting in a 62% revenue growth rate, but this year it dropped significantly.

Alphabet's core business, advertising revenue, reached $56.3 billion in the second quarter of this year, up 12% year-over-year. Search advertising revenue increased by 14% to $40.689 billion. YouTube's advertising revenue was $7.34 billion, with a growth rate of only 5%, a significant decrease compared to 84% a year ago. This is interpreted as companies drastically reducing advertising due to recession concerns. Ruth Porat, Alphabet's Chief Financial Officer (CFO), explained, "Some advertisers reduced spending considering uncertainties due to various factors."

With the dollar recently reaching its highest value in 20 years, Alphabet inevitably suffered revenue hits due to the strong dollar. In its earnings report, Alphabet also stated that if there had been no exchange rate effects, the revenue growth rate would have been 16%. CFO Porat told CNBC that exchange rate effects reduced revenue growth by 3.7%, and the strong dollar is expected to have a greater impact in the third quarter.

However, despite the slowdown in advertising revenue growth, market insiders who reviewed Alphabet's performance seemed to judge that the impact was not as severe as expected. After-hours trading saw Alphabet's stock price rise more than 4%. Bloomberg News evaluated, "Alphabet achieved second-quarter revenue in line with market expectations while showing solid resilience amid the slowdown in the advertising market growth." It is seen as less affected compared to other social networking services (SNS) such as Snap and Twitter, which were hit hard.

Dan Morgan, Senior Portfolio Manager at Synovus Trust Company, analyzed, "This report can be interpreted as one to breathe a sigh of relief after reading. In a very difficult environment where competitors are struggling, the fact that Google generated advertising revenue will be a wing." Evelyn Michel, an analyst at Insider Intelligence, evaluated, "Google is in a relatively good position amid the storms ahead."

In the global advertising market, where it is competing with China's SNS TikTok, Alphabet faces various lawsuits related to online advertising, which is pointed out as another variable that could affect future performance.

Alphabet has recently declared it will halt hiring until the end of the year in response to market changes due to the economic recession. Sundar Pichai, Google's Chief Executive Officer (CEO), urged employees to work with "a more entrepreneurial spirit, greater urgency, focus, and thirst."

This content was produced with the assistance of AI translation services.