Google-parent Alphabet reported March-quarter earnings and revenue that missed Wall Street targets. GOOGL stock fell as YouTube advertising growth fell short of expectations amid rising competition with TikTok.
After the market close on Tuesday, Alphabet said first-quarter earnings fell 6% to $24.62 per share. Google reported a loss of $1.07 billion on equity investments, reducing profit by 99 cents per share.
The company reports earnings under generally accepted accounting principles, also known as GAAP.
Also, gross revenue rose 23% to $68.01 billion. Analysts had predicted Google earnings of $25.74 per share on revenue of $68.05 billion.
"We think revenue results were largely fine (search beat slightly, same for cloud), but not enough to soothe investors' rising ad recession anxiety, nor growing TikTok competition concerns after YouTube missed again and by a larger margin than prior," BMO Capital Markets analyst Daniel Salmon said in a note to clients.
GOOGL stock fell 3.7% to close at 2,285.89 on Wednesday.
Google Stock: TikTok, YouTube Competition Heats Up
Meanwhile, YouTube advertising revenue rose 14% to $6.87 billion. Also, analysts had estimated YouTube ad revenue of $7.21 billion.
Social media firm TikTok's advertising growth has boomed via its short-form videos. That poses a headwind to YouTube's growth, analysts say.
On Alphabet's earnings call with analysts, the company said "YouTube Shorts" now has more than 30 billion views per day. That's four times more views than last year. YouTube Shorts is Google's effort to battle TikTok. But Google has yet to turn YouTube Shorts into a money-maker, analysts say.
At Jefferies, analyst Brent Thill said in a report: "YouTube missed street by 8%, after misses in Q4 and Q3. Growth of 14% year-over-year was the lowest since the pandemic hit."
He added: "Negative factors included slowing growth in direct response ads, continued impact from Apple iOS 14 changes, suspended operations in Russia and slowing in brand ads in Europe after start of Ukraine war."
Google said cloud-computing revenue rose 44% to $5.82 billion, topping estimates of $5.73 billion.
The company said net revenue, minus traffic acquisition costs, came in at $56.02 billion vs. estimates of $56.26 billion. Traffic acquisition costs — what Google pays to have traffic directed to its websites — jumped 23% to $11.99 billion. That surpassed estimates of $11.69 billion.
The company said Google's board of directors has authorized $70 billion in additional stock repurchases.
Google Shares Down 17% This Year
In the first quarter, the company repurchased $13.3 billion of Google stock vs. $13.5 billion in the December quarter and $12.6 billion in the September quarter.
"We continue to make considered investments in capex, R&D and talent to support long-term value creation for all stakeholders," Alphabet Chief Financial Officer Ruth Porat said in the earnings release.
Heading into the Google earnings report, the stock had shed 17% in 2022 amid volatility in the Nasdaq. GOOGL stock holds a Relative Strength Rating of 57 out of a best-possible 99, according to IBD Stock Checkup.
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Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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