Sundar Pichai, chief executive officer (CEO) of Alphabet, has said that his firm is planning to scale down the rate of hiring in Q4 of 2022 and for 2023 as the tech giant’s Q3 revenue grew at its slowest pace in more than two years, reported by CNBC.
Pichai stressed on some cost-cutting measures across the company, citing economic challenges, including a potential recession, soaring inflation, rising interest rates, and tempered ad spending. In September, the CEO said that he wanted to make the firm 20 per cent more efficient, which could lead to job and product cuts.
Shares of Alphabet sank about 7 per cent in extended trading on Tuesday after the company reported weaker-than-expected earnings and revenue for the third quarter because of a continued slump in the online advertising market, as the company pointed out.
According to CNBC, revenue growth slowed to 6 per cent from 41 per cent a year earlier as the company contends with a continued downdraft in online ad spending. Other than one period early in the pandemic, it’s the weakest period for growth since 2013. YouTube ad revenue also slid about 2 per cent to $7.07 billion from $7.21 billion a year ago.
Analysts were expecting an increase of about 3 per cent. Alphabet logged overall advertising revenue of $54.48 billion during the quarter, up slightly from the prior year.
Philipp Schindler, chief business officer for Google, said the company saw a pullback in spend on search ads from certain areas such as insurance, loans, mortgage and cryptocurrencies.
The report marks an ominous start to Big Tech earnings week for investors focused on the digital ad market.
Last week, Snap issued disappointing results and said it was unable to provide a forecast given the volatility in spending and concerns about the economy. Snap plummeted 28 per cent on Friday following the numbers. Meta is scheduled to report results on Wednesday, and analysts are expecting a second straight quarter of declining revenue.
Alphabet’s stock fell below $97 after hours. Its lowest close for the year was $95.65 on September 30. Prior to the after-hours drop, Alphabet shares are down 28 per cent over the past year, slightly underperforming the Nasdaq.
Meta shares also fell 4 per cent in extended trading on Tuesday after rallying 6 per cent during the day.
Pichai in a statement said, “Sharpening our focus on a clear set of product and business priorities,” while Ruth Porat, the finance chief, said “We’re working to realign resources to fuel our highest growth priorities.” He added, “In the fourth quarter headcount additions will slow to less than half the number added in Q3.”
During the quarter, Google Cloud brought in $6.9 billion — more than analysts expected. That’s a notable increase from $5 billion the year prior. Losses in Google Cloud widened to $699 million from $644 million the year prior.
Google also cancelled the next generation of its Pixelbook laptop and cut funding to its Area 120 in-house incubator. Last month, Google had said it would be shuttering its digital gaming service Stadia.