Greater innovations around artificial intelligence (AI), too, contributed significantly to the company’s performance.
“In the second quarter, our performance was driven by search and cloud,” Alphabet and Google chief executive officer (CEO) Sundar Pichai said in a statement. “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.”
Google Search’s revenue for the quarter was $40.6 million, up from $35.8 million in the year-ago period, while Google Cloud brought in $6.2 million, up from $4.6 million in the year-ago period.
Pichai said with an “uncertain global economic outlook,” the company’s strategy to invest in deep technology and computer science to build helpful products for the long term was right.
Though Alphabet’s revenues grew 13% from the year-ago period to $69.7 billion, the figures were significantly lower than the 62% year-on-year (YoY) growth the company posted during the same period last year, driven by post-pandemic reopening and consumer spending.
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“Going forward, the strong revenue performance last year continues to create tough comps that will weigh on YoY growth rates of advertising revenues for the remaining year,” Alphabet chief financial officer (CFO) Ruth Porat said on the earnings call with analysts.
Alphabet said foreign currency movements affected YoY revenue growth rates by 3.7%, which will only increase in the third quarter.
Another prominent headwind is the scrutiny from antitrust regulators, including in India, where Google is embroiled in an investigation by the Competition Commission of India.
Advertising revenue increased just 12% to $56.3 billion, as fears of a recession loom and marketers cut back on spending. YouTube was hit badly by this, where sales rose a tepid 5% after surging 84% in the same period a year ago.
However, Philipp Schindler, senior vice-president and the chief business officer said he was optimistic about the growth potential of the platform.
“Despite the pullback from some advertisers, we really believe YouTube remains well positioned to benefit from the shift to digital video – maybe, first on brand. It’s worth calling out that this was our first year of participating in the upfronts, which is exciting and a testament to YouTube’s evolution. We were very pleased with our strong growth and upfront commitments,” he said.
Pichai also said in Q2 YouTube TV surpassed 5 million subscribers, including trailers.
“There’s a lot of potential for shopping on YouTube,” he said. “Just last week, we announced a partnership with Shopify. It will help creators easily connect their stores to YouTube and enable shopping across their live streams and videos.”
Alphabet said its full-time headcount rose 21% to 174,014 from 144,056. However, last month the company said it will slow the pace of hiring and investments through 2023 as Pichai told employees in a memo, “we’re not immune to economic headwinds.”
“Given the uncertain global economic outlook and the hiring progress achieved to date, we intend to slow the pace of hiring,” Porat said. “We expect our actions on hiring to become more apparent in 2023. Our headcount additions in the third quarter will reflect our strong commitments, including new graduate hires.”
