Alphabet had a rocky second quarter with revenue of $69.69 billion, up 13 percent from the same period in 2021, though net income was down 14.6 percent to $16 billion. It was Alphabet’s slowest growth rate since Q2 2020, when COVID-19 wreaked havoc on the economy. In a contracting 2022 advertising market, Alphabet posted 12 percent ad growth, totaling $56.3 billion for the quarter ended June 30 versus the same period the previous year. Ad growth was down substantially over the 69 percent increase of Q2 2022, but increased nonetheless where others are declining.

Alphabet and Google CEO Sundar Pichai said on the earnings call the revenue growth was driven by search, the cloud and AI. Alphabet said revenue would have been closer to $72 billion but for the strong dollar and currency exchange. Roughly 55 percent of Alphabet sales are generated outside the U.S.

The Q2 performance fell short of Wall Street expectations by nearly $190 million, reports The Wall Street Journal, noting “shares rose more than 5 percent in after-hours trading, reflecting the extent to which investors had braced for disappointing earnings given the broader fallout in digital ads.”

“The quarter-on-quarter deceleration in both YouTube and Network advertising revenues primarily reflects pullbacks in spend by some advertisers,” Alphabet and Google CFO Ruth Porat said. The Google Search sector took in $40.7 billion, a 14 percent increase propelled by travel and retail, Porat said.

YouTube advertising revenues of $7.3 billion were up 5 percent, modest year-on-year growth reflecting “the uniquely strong performance in the second quarter of 2021.” Network advertising revenues of $8.3 billion were up 9 percent, driven by the AdSense web publisher insertion tool.

“The company’s biggest moneymaker — Google Search — actually topped expectations,” reports Reuters, quoting Investing.com analyst Jesse Cohen summarizing that “despite the underwhelming quarter, expectations were so low that investors blew a sigh of relief.”

“Google’s advertising business didn’t seem to suffer as badly as other Internet companies” — namely Twitter and Snap — but Alphabet “still faces a difficult environment,” said CNET. Calling Google “a bellwether for the strength of online advertising,” The Wall Street Journal said its slowdown “suggests further weakness in an industry critical to the health of many Internet companies.”

“Sales in the Google Cloud division rose 36 percent from a year earlier to $6.28 billion in the second quarter,” per WSJ, noting, “the business recorded an operating loss of $858 million during the quarter, reflecting Google’s heavy spending push as it attempts to catch up” to the cloud businesses of Amazon and Microsoft.

“Alphabet is moving forward with expanding its cloud computing footprint, building out new offices and bringing its Google Fiber Internet service to new communities,” Reuters writes, noting that “with investors accustomed to gross profit margins as high as 60 percent, Google, like many of its peers, recently began slowing hiring in some units to better manage expenses.”