the latest sign of a global downturn for tech, Google has suffered its slowest quarterly sales growth in two years. A 12pc rise in quarterly revenue to $69.7bn (£57.96) was posted by the search engine giant’s parent company, Alphabet. The performance, while better than rivals, was its weakest growth in two years and profits fell 13.6pc to $16bn.
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Advertising revenue, earned largely from its search business, rose by 2.2pc. it was called “solid performance” by Ruth Porat, chief finance officer of Alphabet and Google.
The fall in profits was partly driven by a $300m increase in Google Cloud's losses to a total loss of $1.6bn during the three month period. Alphabet also incurred a $2.1bn hit from paying deferred income taxes, as well as having spent $1bn on mergers and acquisitions, an increase of $700m on the previous year. Rivals have recently reported a slowdown in the online advertising market, with both Snap and Twitter reporting weak earnings last week. Microsoft on Tuesday also said it had taken a $100m hit from lower ad spending on its LinkedIn platform.
Sundar Pichai, chief executive Alphabet and Google, which also owns YouTube, said: “In the second quarter our performance was driven by Search and Cloud.
“The investments we’ve made over the years in Artificial Intelligence and computing are helping to make our services particularly valuable for consumers, and highly effective for businesses of all sizes. As we sharpen our focus, we’ll continue to invest responsibly in deep computer science for the long-term.”
“Going forward, digital technology will be the key input that powers the world’s economic output,” said Satya Nadella, chairman and chief executive officer of Microsoft.
“Across the tech stack, we are expanding our opportunity and taking share as we help customers differentiate, build resilience, and do more with less.” However, the company was stung by a series of unexpected setbacks. Foreign exchange movements that cost it $595m and factory shutdowns in China, which knocked $300m off earnings. Reducing operations in Russia as a result of the war in Ukraine cost the company $126m. The financial health of two of the most influential US tech companies is seen as an important bellwether for the broader US economy, which faces an increasingly bleak outlook due to rising inflation and slowing business spending. Inflation is running at a 40-year high with the consumer price index hitting 8.6pc in May this year.
The US Federal Reserve has rapidly raised interest rates in response, taking them from 0.25pc in March to 1.75pc. That has hurt tech companies, many of which rely on cheap funding to fuel growth and investment. Alphabet’s share price has dropped just over a quarter so far in 2022. Many other tech companies have suffered even steeper falls, with Snapchat-owner Snap dropping 79pc since the beginning of the year. Redmond, Washington DC-headquartered Microsoft's market value stood at $1.87tn on Tuesday evening, a 27pc slump from its $2.58tn all-time high in November 2021. During the intervening eight months Microsoft’s share price has tracked the general slump in tech stocks, dropping just over a quarter.
