The technology company reported US$36.3 billion in revenue, representing a 17% increase but also its slowest revenue growth for a quarter since 2015.
Investors moved from Alphabet after disappointing Q1 sales figures revealed on an earnings call added weight to the growing concern that its advertising business is being eroded by Amazon and Facebook.
Shares in parent company Alphabet were down more than 8% at one point on 30 April, the biggest decline since October 2012.
Google share price plunges, wiping $77bn off its market value https://t.co/NuJ7tWMvig
— The Guardian (@guardian) April 30, 2019
Alphabet facing regulatory challenges, slowing growth at YouTube
The reported US$36.3 billion fell short of analyst’s estimates by around US$1 billion, though earnings per share (US$11.90) were healthier than the anticipated figure of US$10.60
While many companies would be thrilled with the 15.3% growth in advertising revenue Google reported, it was down from the previous quarter where this figure grew by 19.9%. This followed five successive quarters were growth was higher than 20%.
Ruth Porat, CFO of Alphabet (Google’s parent company), said on the earnings call that the slowdown was largely a result of decelerating growth at YouTube, which “represents the vast majority of total clicks”. YouTube is a subsidiary of Google.
“The rate of YouTube click growth decelerated versus what was a strong Q1 last year reflecting changes we made in early 2018, which we believe are overall additive to the user and advertiser experience,” she said.
The company’s earnings per share did not factor in the US$1.7 billion fine levied by the EU for anti-competitive conduct in the online advertising market. This amount will be accounted for in the coming quarter.
— Reuters (@Reuters) April 30, 2019
Have changes at YouTube hurt Alphabet’s bottom line?
Google CEO Sundar Pichai assured investors the company was seeking to address criticism that it was facilitating the spread of fake news, hate speech and malicious content aimed at children. He also said said the company was improving its algorithms to monitor user-generated content on YouTube.
In a statement to CNBC, a Google spokesperson denied the company had ever generated significant revenue from the type of content it was now committed to removing.
“There’s a misconception that YouTube makes money off of recommending ‘radical’ content, but the truth is that very little of this content makes any kind of meaningful money,” the statement said. “In fact, when we cleaned up our partner program to remove bad actors last year, we made it clear that 99% of those impacted creators were making less than $100 a year.”
CNBC Mad Money host Jim Cramer blasted the company for not owning its mistakes on the earnings call.
“When you miss numbers, you have to acknowledge it,” he said. “You need to say, ‘Hey, we messed up, this is what went wrong, this is how we’ll fix it’. Alphabet disappointed, but Ruth Porat didn’t say that.”