Google's ad sales growth accelerated in 3Q, but investors are unimpressed with the performance

2023-10-25 05:15

Google’s digital advertising sales growth accelerated during the summer, advancing a recent revival that helped its corporate parent Alphabet Inc. to deliver a quarterly profit that exceeded analysts' projections

SAN FRANCISCO (AP) — Google’s digital advertising sales growth accelerated during the summer, advancing a recent revival that helped its corporate parent Alphabet Inc. to deliver a quarterly profit that exceeded analysts' projections.

The third-quarter results released Tuesday for the July-September period included a 9% increase in Google’s ad sales from the same time last year. Those gains were the main reason Alphabet’s total revenue rose 11% from a year ago to $76.69 billion. The upturn was even better than the 7% year-over-year increase in revenue that Alphabet produced in the April-June period when it reversed an unprecedented drop in Google’s ad revenue after nearly 20 years of growth.

The higher revenue — coupled with cost cuts that have trimmed more than 7,800 employees from Alphabet’s payroll so far this year — enabled the Mountain View, California, company to post a profit of $19.7 billion, or $1.55 per share, a 42% increase from last year. Alphabet ended September with nearly 182,400 employees.

Despite the signs of progress in many areas, revenue from Google's Cloud division that helps powers websites — an area of robust growth — fell below analysts' projections at at time when artificial-intelligence technology was expected to provide a bigger lift.

That letdown appeared to take the luster off the third-quarter report for many investors. Alphabet's stock fell almost 5% in extended trading after the numbers came out. But the company's shares have surged by more than 50% so far this year, a run-up that may have prompted some investors to lock in their gains.

The third-quarter performance indicated that Google’s early push to introduce more artificial intelligence technology into its search engine and other products such as Gmail and its latest Pixel smartphone, is paying off.

“We’re continuing to focus on making AI more helpful for everyone; there’s exciting progress and lots more to come,” Alphabet CEO Sundar Pichai said in a prepared statement.

The results also serve as a reminder of the financial juggernaut that Google has been able to assemble under its dominant search engine – the target of an ongoing antitrust trial focused on the U.S. Justice Department’s allegations that the company has been abusing its power to boost its profit while stifling competition and innovation. Google has vehemently denied the allegations, alleging its success simply flows from all the good that its search engine does for consumers and advertisers.