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Earnings Results: Google stock rises despite an ad downturn, second straight earnings decline

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Shares of Alphabet Inc.’s Google popped more than 2% in extended trading Tuesday after the computing behemoth reported results slightly lower than Wall Street estimates.

Still, the results marked the second straight quarter of year-over-year earnings declines for Google — its first since 2015, but this time on a much larger scale.

Alphabet 
GOOGL,
-2.32%

GOOG,
-2.56%
,
 the most dominant digital-advertising player, reported net income of $16 billion, or $1.21 a share, in its fiscal second quarter, compared with net income of $18.5 billion, or $1.36 a share, in the same quarter last year. [Google recently completed a 20-for-1 stock split, and previous results are revised as a result.]

The results, while not eye-popping, may have mollified investors rattled by poor quarterly results last week from two other ad-dependent companies, Snap Inc.
SNAP,
-3.22%

and Twitter Inc.
TWTR,
+0.25%
.
Facebook parent company Meta Platforms Inc.
META,
-4.50%

is scheduled to report its second-quarter results on Wednesday.

“Google’s earnings miss this quarter proves it’s not immune to the challenges facing the digital advertising industry at large,” Insider Intelligence analyst Evelyn Mitchell said. “Once again, Google’s search and cloud businesses bolstered its overall performance while YouTube growth slowed to a crawl amid tough competition from TikTok and other players in the video-streaming space. It would have been tough to outperform its earnings [last year], but it’s clear Google has its work cut out for it in the back half of the year.”

Google’s revenue after removing traffic-acquisition costs was $57.5 billion, compared with $51 billion in the year-ago period. Overall revenue improved 13% to $69.7 billion. Analysts surveyed by FactSet had estimated net income of $1.27 a share on ex-TAC revenue of $57.6 billion and total revenue of $69.8 billion.

Profit declined 15.6% year-over-year in the quarter, after falling 8.3% in the first quarter; Google last saw earnings decline in two consecutive quarters in the first two quarters of 2015, when the declines came in at 2.3% and 1.8%. Alphabet’s operating-profit margin was 28% in the quarter, down from 31% in the year-ago quarter.

“In the second quarter our performance was driven by Search and Cloud. The investments we’ve made over the years in AI 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,” Alphabet Chief Executive Sundar Pichai said in a statement announcing the results.

Read more: Google may be the safest of the digital-advertising giants, but that isn’t saying much right now

Google’s total advertising sales rose to $56.3 billion from $50.4 billion a year ago. Search was $40.7 billion, vs. $35.8 billion a year ago.

YouTube ad sales continued to grow but not as quickly, to $7.34 billion from $7 billion a year ago.

Google’s Cloud revenue jumped 37% to $6.3 billion; Google Cloud is believed to be third in cloud sales behind rivals Amazon.com Inc.  
AMZN,
-5.23%

and Microsoft Corp. 
MSFT,
-2.68%
.

Google has perhaps benefitted from not offering guidance on its financial results, a practice it has followed for years, sparing it from the outsize expectations of Wall Street. Executives are expected to provide some color on the results in a conference call on YouTube scheduled to begin at 5 p.m. Eastern time.

Google’s stock has skidded 27% so far this year. The broader S&P 500 index 
SPX,
-1.15%

is down 18% in 2022.

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