Google's Parent, Alphabet Revenue Grows 3% Marginally, Dragged By Ad-Spends For March Quarter

Google's parent, Alphabet's total revenue for the quarter ended March 31, 2023 came in at $69.8 billion, it has grown by 3% from the same period last year. Both Alphabet's revenue and profit exceeded the tempered expectations among analysts polled by FactSet Research.

The Mountain View, California, company earned $15.05 billion, or $1.17 per share, an 8% decrease from last year. More than $2 billion charges for mass layoffs and other cost cutting contributed to the earnings downturn. But the ad woes weighed on Alphabet's earnings.

Google's advertising malaise persisted during the first quarter, the ad sales of $54.5 billion decreased from a year ago. It dipped nearly 4% over the final three months of last year. It is the first time Google has sustained back-to-back drops in year-over-year ad revenue since becoming a publicly traded company in 2004.

An unprecedented downturn in Google's digital ad revenue - the company's main moneymaker for more than 20 years - came into sharper focus on Tuesday with the release of the January-March results for its corporate parent, Alphabet Inc.

Google's YouTube video site, a marketing magnet in recent years, saw its ad sales decrease 2.5% from last year, marking its second consecutive quarter of erosion, too. Boosted by growth in its cloud-computing division.

Google's current ad slump largely reflects more cautious spending among companies reacting to slowdown in the consumer spending and inflationary pressure hinting at recession.

To help prop up its profits, Alphabet in January announced plans to lay off 12,000 employees, or 6% workforce, by far the biggest payroll purge in its history. But the layoffs weren't completed before the end of the quarter, leaving Alphabet with more than 190,000 employees as of March 31, roughly the same number it had on December 31 after the company added nearly 34,000 workers last year. Alphabet expects its workforce to reflect the recent layoffs' by the end of June.

Meanwhile the internet company also grapples with advancements in artificial intelligence technology that threatens to undercut its dominant search engine. The artificially intelligent ChatGPT bot released by Microsoft, is being molded in Bing search engine is raising fears for Alphabet. It could be a longer-term threat to Google's search engine that drags down ad revenue, too.

If people embrace ChatGPT and Bing as better ways to find what they are looking for, it could siphon away traffic from the Google search engine that has long been the internet's main gateway. That in turn would depress Google's ad sales.

Google is trying to counter the popularity of ChatGPT with its own alternative, dubbed Bard, but so far has restrained its capabilities t o ensure it doesn't behave in a way that offends its billions of users - and advertisers in the process - and to reduce the chances it manufactures misinformation and other fabrications that the technology calls "hallucinations."

Although the revenue and profit was above expectations and a $70 billion stock buyback plan, boosted in lifting Alphabet's stock price by 4% in extended trading after the numbers came out. The company's share price fell by about 15% in past year amid investor concerns about Google's ad slump and worries about the company's future prospects.