Alphabet inventory falls after disappointing earnings report

Google LLC Chief Executive Officer Sundar Pichai speaks during the Google Cloud Next ’19 event on Tuesday, April 9, 2019 in San Francisco, California, USA.

Michael Kurz | Bloomberg | Getty Images

shares of alphabet was down more than 6% on Wednesday, the company’s worst day since March 2020 after it released third-quarter earnings on Tuesday that missed both the top and bottom lines.

The company posted its weakest quarter of growth since 2013, barring another period early in the coronavirus pandemic. Revenue growth slowed to 6% from 41% a year earlier as the company grapples with a sustained decline in online advertising spending.

The company reported total advertising revenue of $54.48 billion during the quarter, up slightly year-over-year. Analysts expected YouTube ad revenue to grow about 3%, but they fell about 2% to $7.07 billion, compared with $7.21 billion a year ago.

Bernstein analysts kept their outperform rating on Alphabet stock but said the company has been feeling “increasingly uneasy” over the past six months as Google’s advertising revenue has slowed.

“Google is first and foremost an ad business, and digital ads are no longer a safe place to hide,” they said Wednesday.

Raymond James analysts also maintained their Outperform rating, citing expectations for long-term ad revenue growth and Google Cloud momentum. The analysts noted Alphabet’s plans to slow its hiring and are therefore “optimistic that margins can improve by the end of 2023.”

Alphabet’s report marks an ominous start to the big-tech earnings week for investors focused on the digital advertising market, and Needham analysts said it’s likely bad news for it Meta.

“GOOGL spoke of more spending on hardware in the future. GOOGL and META both spend more CapX and OpEx for hardware, which means lower [Return on Invested Capital] than in the past when GOOGL was primarily a software and advertising business,” they wrote in a statement Wednesday.

Meta is expected to report on the results after the bell on Wednesday.

— CNBC’s Jennifer Elias and Michael Bloom contributed to this report.

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