In the first quarter of this year, Google’s revenue was $68.01 billion, a 23% increase from last year. It’s a slowdown from 34% growth during the first quarter of 2021, when the economy was recovering from the COVID-19 pandemic.
Analysts had expected YouTube’s ad revenue to exceed expectations for the quarter. When users were mostly at home on their devices, the video site benefited particularly from the pandemic. The missed opportunity comes as TikTok captures an increasing share of the social media video market.
Investors reduced their exposure, as the stock of Alphabet, the parent company of Google went down 18% for the year as of Tuesday’s close. Alphabet shares fell after hours to their lowest since May 2021.
What they are saying
Ruth Porat, CFO of YouTube, said on the analyst conference call that direct response ads experienced ‘modest growth’. “The deceleration is largely a result of the strong first quarter of 2021,” she said.
On the call, Sundar Pichai told investors that YouTube’s TikTok competitor now has 30 billion views per day, which is double what it had during the prior quarter and four times what it had during the year before.
Key highlights of the result
- As more big enterprises migrate their workloads to the cloud, Google’s cloud business grew by 44% and surpassed estimates. Yet, the cloud division still lost money, generating a $931 million operating loss in comparison to $974 million a year ago.
- The invasion of Ukraine halted Google’s Russian operations during the quarter. In the European region, including the Middle East and Africa, revenue growth slowed to 19% in the first quarter from 33% a year earlier.
- With revenues of $440 million from $198 million, Alphabet’s other businesses, which include its life sciences businesses and self-driving car unit Waymo, increased nearly twofold. There was a slight increase in losses to $1.15 billion for the unit.
- As expected, the company reported $11.99 billion in traffic acquisition costs, the metric used to show how much it paid other websites to acquire traffic.
- Google generated $6.81 billion in other revenue, including revenue from hardware, the Play Store, and non-advertising YouTube videos.