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YouTube underperforms expectations, and shrinks as a company report says

On Tuesday, after Alphabet reported unexpectedly weak earnings and revenue for the third quarter reported by CNBC, its shares dropped by about 7% in extended trading. The company also said that it would significantly decrease headcount growth.

Since the company is still battling the decline in online ad revenue, growth has decelerated to 6% from 41% last year. It's now the weakest period for expansion since 2013-- with only one exception during the pandemic.

Despite YouTube's ad revenue decreasing about 2% to $7.07 billion in the last year, analysts had been expecting an increase of 3%. Alphabet reports that their overall advertising revenue during the quarter was $54.48 billion, which is only slightly higher than it was the previous year.

  • Earnings per share (EPS): $1.06 vs. $1.25 expected, according to Refinitiv estimates.

  • Revenue: $69.09 billion vs. $70.58 billion expected, according to Refinitiv estimates.

  • YouTube advertising revenue: $7.07 billion vs $7.42 billion expected, according to StreetAccount estimates.

  • Google Cloud revenue: $6.9 billion vs $6.69 billion expected, according to StreetAccount estimates

  • Traffic acquisition costs (TAC): $11.83 vs $12.38 expected, according to StreetAccount estimates

CEO Sundar Pichai claimed that the company is “sharpening our focus on a clear set of product and business priorities,” while Ruth Porat, the finance chief, said “we’re working to realign resources to fuel our highest growth priorities.”

Alphabet’s stock continued to fall after hours, despite earlier attempts to stall the decline. The drop leaves Alphabet shares 28% lower than they were this time last year and puts them slightly behind the Nasdaq index.

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