Alphabet only narrowly missed estimates for its quarterly revenue on Tuesday, a sign that the tech giant can weather an industry slowdown better than expected.
Alphabet reported second-quarter revenue of $69.69 billion, up 13% from the same period a year earlier and nearly in line with the average expectation of $69.88 billion among investment researchers tracked by Refinitiv .
The news cheered Wall Street, with the company’s shares up 3% after hours. The results gave investors hope that Alphabet’s search and advertising business could withstand large countries that could go into recession over the next year.
Still, Alphabet’s results marked the latest sign that the tailwinds driving big tech companies during the pandemic have shifted. The array of new challenges facing the industry has already sent the technology-driven Nasdaq Composite down 26% so far this year.
Alphabet’s report would mark impressive growth for most companies outside of tech. But it marked Alphabet’s lowest growth rate since the April-June quarter of 2020, when the company suffered its only year-over-year revenue decline in its history.
On a call with investors on Tuesday, Alphabet CFO Ruth Porat addressed the growing headwinds, saying it was difficult to draw comparisons to last year’s “significant growth rate.”
“There is uncertainty in the global economic environment and issues across the industry, whether it’s supply chain or inventory,” he said.
On July 20, Google announced that it would implement a hiring freeze of several weeks, “to allow teams to prioritize their roles and hiring plans for the rest of the year.” The move was widely interpreted as a worrying sign, not only for Alphabet, but for the industry as a whole, as the behavior of tech giants is often seen as an economic starting point.
Despite the freeze, Alphabet made a significant number of hires during the quarter, adding more than 10,000 employees from late March to June. The company closed the quarter with about 174,000 employees worldwide.
Porat addressed the hiring slowdown on the earnings call, saying the company “will continue to hire for critical roles, particularly focused on top technical and engineering talent,” but that “the pace of staffing will moderate in ‘next year’.
In light of these changes, analysts had been bracing for negative results from Alphabet as rising inflation has caused ad buyers to spend less on marketing. Alphabet, like others in the tech industry, has struggled to maintain the huge growth it saw during the pandemic when much of life moved online.
Fears were bolstered by recent reports of struggling earnings from tech companies like Snap, Twitter and Netflix, many of which are also halting or slowing hiring.
Overall profit was $16 billion, or $1.21 per share, compared with the average estimate of $1.29 per share. Alphabet’s profits tend to be unpredictable because of sporadic gains or losses, at least on paper, in its stakes in many startups.
Still, within the $602 billion online advertising industry, Google is expected to maintain a 29% market share, or the largest share for the 12th consecutive year, according to Insider Intelligence.
“With its huge market share in search advertising, Google is relatively well positioned to weather the rough waters ahead as advertisers prioritize lower-funnel tactics,” said Evelyn Mitchell, an analyst at ‘Insider Intelligence.
Reuters and the Associated Press contributed to this report