Alphabet
However, shares rallied which could be an indication that weaker results were already 'baked into' the stock price and that investors believe that conditions will improve in the future. This is similar to what was experienced by other major tech companies like Apple
Inside the Numbers
In Q2, Alphabet reported $1.21 which fell short of analysts' expectations of $1.28 per share. The company also felt an adverse impact from the strong dollar which impacted revenue growth by 3.7%. It also warned that Q3 revenues would also be similarly impacted.
Revenue also missed at $69.7 billion vs $69.9 billion. Revenue growth did remain positive at 13% but it was a massive deceleration from last year's 62% increase which was abetted by the strong economy during the post-pandemic period and favorable comps due to the pandemic.
YouTube generated $7.3 billion in advertising revenue which was below analysts' estimates of $7.5 billion. This was a 5% increase from last year. In total, ad revenue was up 12% to $56 billion. Two factors affecting ad sales are less ad spending overall and more ad dollars flowing to Tiktok.
Google Cloud revenue also missed expectations at $6.28 billion vs $6.41 billion. The unit lost $858 million during the quarter as it continues to focus on growth and capturing market share from its larger competitors like Amazon Web Services (AWS) and Azure.
Like a lot of other tech companies, Alphabet is slowing its hiring after adding nearly 30,000 workers over the past year.
Alphabet didn't provide a forecast for Q3 or the full year, but analysts are forecasting 14% growth for the full year.
So far in 2022, Alphabet shares are down 18%. However, the company's valuation has sharply improved with its forward P/E at 19.8 even with analysts forecasting 15% EPS growth next year and above-average profit margins of 26%.
