Tech giants Alphabet and Microsoft both posted disappointing third quarter earnings reports this week, proof that even the largest companies in the sector are not immune to the current global economic strife.
Alphabet, the parent company of Google, reported a net profit of $13.9 billion for the third quarter, a 27% drop from the same period last year. Although revenue jumped 6% to $69.1 billion, the earnings fell short of analyst estimates.
The results appeared to suggest online advertising was beginning to slow as marketers slashed their budgets amid uncertain economic conditions. Ad sales at Google’s YouTube shrank 1.9% to $7 billion in the quarter. Search ad sales grew 4% to $39.5 billion, below expectations of $41 billion. The company attributed the slowdown to a particularly strong quarter this time last year.
“The growth in our advertising revenues was also impacted by lapping last year’s elevated growth levels and the challenging macro climate,” Sundar Pichai, Alphabet chief executive, told analysts.
In August, Alphabet announced it would slow or even freeze hiring in some departments in anticipation of a more challenging economic landscape. Pichai has implemented a number of cost-cutting measures in recent months. In July he unveiled his “Simplicity Sprint” plan, which aimed to make the company’s groups 20% more productive. In September Google closed down Stadia, its video game streaming service, and cut funding and employee numbers at Area 120, its tech incubator.
Microsoft also posted poor quarterly numbers this week. The company reported its slowest growth in five years as the strong U.S. dollar and worsening personal computer sales hit hard.
The company reported an 11% jump in revenue to $50.1 billion for Q3, but profit fell 14% to $17.6 billion from the previous year. Microsoft’s revenue typical grows between 12% and 22% each quarter.
Microsoft had warned investors to expect similar figures as the international conditions have strengthened the U.S. dollar. Taking the currency fluctuations out of the equation, Microsoft’s business grew 16%.