The announcement of the third quarter results by Google was eagerly awaited, insofar as these results (like those of Microsoft) can be an indicator of the economic situation in the United States and in the world. Unfortunately, as expected, these results from Google, or rather Alphabet (its parent company), were disappointing.
During the third quarter, the company’s revenues continued to grow. Alphabet generated $69 billion during the three-month period, compared to $65.1 billion during the same period in 2021.
But according to CNBC, analysts were expecting slightly higher earnings. And growth has been greatly slowed down. While this was 41% in the third quarter of 2021, it is only 6% during the same period in 2022.
The American media also explains that if we do not take into account the start of the pandemic, it is Google’s weakest period of growth since 2013.
Google’s return in Q3
2021: $65.1 trillion
2020: $46.2 trillion
2019: $40.5 trillion
2018: $33.7 trillion
2017: $27.8 trillion
2016: $22.5 trillion
2015: $18.7 trillion
2014: $16.5 trillion
2013: $13.8 trillion
2012: $13.3 trillion
2011: $9.7 trillion
2010: $7.3 trillion
2009: $5.9 trillion
— Jon Erlichman (@JonErlichman) October 26, 2021
Profits down, Google tightens its belt
And when it comes to profits, it’s even more disappointing. Indeed, profits for Google’s parent company were $13.9 billion in the third quarter of 2022, up from $18.9 billion a year ago.
As for advertising revenue, Google’s cash machine, these were $54.4 billion in the third quarter of 2022, compared to $53.130 billion a year ago. During the presentation of these results, Google mentioned a drop in advertiser spending, particularly in the categories of insurance, loans, mortgages and cryptocurrencies.
In essence, in addition to adverse macroeconomic conditions, Google is not immune to the cryptocurrency winter. As a reminder, since the beginning of the year, the values of the main cryptos, such as Bitcoin or Ethereum, have collapsed after reaching record highs in 2021.
Like other digital giants, Google continues to tighten its belt in order to focus its resources on priority projects. The company’s chief financial officer, Ruth Porat, explained that Google will focus “on a clear set of products and business priorities”.
“[…]we are working to realign resources to fuel our highest growth priorities”she also explained.
Projects halted and slowdown in hiring
Recently, Google announced the end of its Stadia streaming service. It also ended the development of Pixelbooks. And the company cut funding for its incubator, Area 120.
In terms of headcount, the number of Google employees continued to grow in the third quarter. This number has fallen from 150,028 in 2021 to 186,779. But new hires will be significantly fewer in the last quarter of 2022, CEO Sundar Pichai has warned. And this slowdown in hiring will be more visible from next year.
Good results for the hardware part
Revenues from the sale of smartphones and other physical products are not very large. And Google is still very far from the market shares of Apple or Samsung.
However, Pixel smartphones are among the firm’s priorities. And the good news is that these are selling very well. Or, at least, Google is satisfied. Recently, this one recorded its best week ever, for Pixel smartphone sales.
As a reminder, in the third quarter, Google launched the Pixel 6a, an affordable version of the Pixel 6. And more recently, the Mountain View company launched the Pixel 7 and the Pixel 7 Pro, as well as the connected watch Pixel Watch.
In the future, Google could focus even more on its Pixels
A new era has begun for Google smartphones and the Android ecosystem, with the launch of the Pixel 6 in 2021. Indeed, the firm seemed to place more importance on this brand, and ready to compete with the iPhone and the Galaxy smartphones.
But apparently Google could prioritize its hardware division even more, which will benefit future Pixel smartphones. This is at least what is suggested by a rumor published a few days ago by the site The Information.
In essence, Google would like to increase its Pixel smartphone sales to protect its mobile ad revenue. On the one hand, the iPhone is gaining ground. And on the other, Google fears that its deal with Apple, allowing Google Search to be the default search engine on iPhone, could be overturned by regulators.