Google’s parent company has reported a drop-off in profit for a second consecutive quarter, despite a handsome rise in revenue.
As per the latest earnings report, Alphabet brought in a profit of circa $16 billion in Q2 2022, down from $18.5 billion for the same quarter last year. Meanwhile, total revenue for the quarter rose by 12.6% year-on-year to reach $69.7 billion.
The reason for this disparity appears to be a combination of rising sales and marketing costs and an increase in research and development spend, which cost the company an additional $3 billion last quarter. Google also spent more heavily on M&A activity and took a $2.1 billion hit from deferred income tax payments.
As ever, the largest portion of Alphabet revenue stemmed from its digital advertising business, with the “Google Search and other” segment alone responsible for $40.7 billion in revenue for Q2.
The total ad revenue figure was supplemented by $7.3 billion generated by YouTube advertising and $8.3 billion from programs like Google Adsense, whereby publishers and website owners host display ads on their own properties.
Although Google’s cloud services business remains highly unprofitable (losing $858 million for the quarter), the division – which houses both Google Cloud products and Workspace productivity software – attracted $6.2 billion in sales, marking an increase of more than a third over 2021.
“In the second quarter our performance was driven by Search and Cloud,” said Sundar Pichai, Alphabet and Google CEO. “The investments we’ve made over the years in AI and computing are helping to make our services particularly valuable for consumers, and highly effective for businesses of all sizes.”
“As we sharpen our focus, we’ll continue to invest responsibly in deep computer science for the long-term.”
However, although total revenue figures were up-and-to-the-right across practically all business segments, Alphabet recorded its slowest sales growth in two years, perhaps signalling trouble ahead for companies in the digital advertising sector as businesses cut back on spending.