Google ad sales take a hit and widely miss estimates, Alphabet stock drops 6%

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A downturn in digital-ad spending is hurting the company. The parent company of the internet giant reported sales growth of just 6 percent and missed on advertising revenue.

Net income for the third quarter was $13.9 billion, or $1.06 a share, compared with net income of $1.40 a share in the year-ago quarter. It was the slowest year-over-year growth since sales declined in June 2020 and revenue after removing traffic-acquisition costs was $57.3 billion.

Net income was expected to be $1.26 a share on ex-TAC revenue of $58.2 billion and overall revenue of $71 billion, according to analysts. After the release of the results, the shares of the company fell in after-hours trading.

The results, which missed in several key product categories, further spooked investors, already spooked by poor quarterly results last week. Meta Platforms is the parent company of Facebook.

During a conference call with analysts, Pichai admitted the shortfall in ad revenue. He promised to take a number of measures, including a focus on products that improve search through artificial intelligence and scaling back hiring.

Philipp Schindler said on the call that the company is operating in an uncertain environment.

The company's total advertising sales increased to $54.5 billion from $53.13 billion a year ago, but missed analysts' average expectations. Last year, search was $37.93 billion. YouTube ad sales fell from a year ago.

Evelyn Mitchell said that it was a bad sign for digital advertising. Due to persistent competition in streaming and short video, YouTube ad revenues fell for the first time since the company began reporting earnings separately.

Amazon.com and Microsoft are believed to be third and fourth in cloud sales, respectively.

The fourth-quarter guidance was not disclosed as usual. Ruth Porat warned that the company faces tough comps in the fourth quarter. In the fourth quarter of last year, the company earned $75.3 billion.

So far this year, the stock of the search engine has skidded. The S&P 500 index is down more than 20% in the next four years.