Google Stock Slumps As YouTube Ad Sales Earnings in Mar Q1 Earnings: $70 Billion Buyback Addition Softens Blow

Google Stock Slumps As YouTube Ad Sales Earnings in Mar Q1 Earnings: $70 Billion Buyback Addition So ...

Alphabet () - stocks fell Wednesday as the search and advertising business reported lower-than-expected first quarter earnings despite a global pullback in ad sales related to Russia's war on Ukraine and increasing competition from China-based TikTok.

Google's bottom line rose to $24.62 per share in the three months ended in March, a drop that missed Street expectations by around $1.14 and was down 6.7 percent from last year.

Group revenues are also disappointed, even after rising 23% to $68.01 billion, with ad sales only in-line with the Street $54.66 billion. However, YouTube ad sales were well shy of expectations at $6.9 billion as Google suspended activities in Russia and European clients tightened marketing budgets. TikTok's increased engagement of young audiences for short-form videos was also a factor.

Snap Inc. () - which makes the Snapchat messaging app, warned that the surge in inflation may impact ad sales, as well as the supply chain difficulties facing organizations around the globe, as it forecasts strong user growth.

Google's cloud division, which is the third largest in the world behind Amazon () and Microsoft () saw revenues increase by 44% to $5.82 billion, while so-called "core search" revenues increased by 2% to $39.62 billion.

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"So, as I said, revenue growth rates we performed in 2021 in Search and across our advertising industries more generally benefitted from lowering the Covid-related weakness in 2020. "So one key point is that we'll not have this tailwind for the remainder of this year. "So that was where we had the greatest impact from COVID," said the author. "In the second quarter of 2022, we'll be in a tough comp."

"I'd also argue that the results from the second quarter will continue to reflect that we had suspended the vast majority of our commercial activities in Russia," she said.

The addition of a $70 million share buyback to the group's capital return intentions stopped several of last night's post-market slump, although Google stocks were still 3% down in pre-market trading, indicating a $2,285.00 opening bell price.

"While we were cautious on YouTube about earnings, we anticipated headwinds would not manifest meaningfully until 2Q. Instead, the combination of a tough comp from direct response, Russia impacting brand spend, Apple platform changes, and FX caused an 8%/7% revenue deficit versus Street estimates," said KeyBanc Capital Markets analyst Justin Patterson, who has a $3,075.oo price target on the stock.

"We anticipate investors will consider whether TikTok's competition and Shorts engagement are influencing growth, according to the size of the miss.

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