Alphabet Shares Lower; YouTube Ads Pressured by Ukraine War

By Michael Dabaie

Alphabet Inc. shares were down Wednesday after the parent company of Google reported quarterly earnings and said YouTube advertising felt an outsized impact from the war in Ukraine.

Class A shares fell 4.5% to $2,266.67 and class C shares were down 4.5% to $2,283.80 in morning trading.

The company after the closing bell Tuesday reported an increase in first-quarter revenue to $68 billion, just shy of the FactSet consensus forecast for $68.1 billion.

Earnings per share fell to $24.62, missing the FactSet consensus for $25.77.

YouTube ad revenue increased to $6.87 billion, but came up short of the FactSet consensus for $7.47 billion.

The war in Ukraine "did have an outsized impact on YouTube ads relative to the rest of Google, and that was both from suspending the vast majority of our commercial activities in Russia, as well as...the related reduction in spend primarily by brand advertisers in Europe," Chief Financial Officer Ruth Porat said during the company's conference call.

Google Search and other advertising revenues of $39.6 billion in the quarter were up 24%, led again by retail followed by a continued recovery in travel, Ms. Porat said in the call. The FactSet consensus was for $39.4 billion.

Google Cloud revenue was $5.82 billion, above the FactSet consensus for $5.75 billion.

"Although YouTube results came in below expectations due to a pullback in ad spend in Europe following the conflict in Ukraine as well as Google's suspension of operations in Russia, Search was relatively in-line, [Google Cloud Platform] continues to deliver strong growth, and operating margins came in better than expected," Citi analysts said in a research report.

The Citi analysts said they lowered projections to account for some of the specific challenges at YouTube and the risk of a broader macro slowdown overall, but are encouraged by factors like strength in the Retail and Travel verticals in Search.

J.P. Morgan analysts Doug Anmuth and Dae Lee pointed to increasing competition from TikTok or others in the short-form video space. The analysts said in a research note that it seems likely that TikTok is becoming a bigger headwind to engagement, and to a lesser degree monetization.

Write to Michael Dabaie at [e-mail]

(END) Dow Jones Newswires

April 27, 2022 10:41 ET (14:41 GMT)

Copyright (c) 2022 Dow Jones & Company, Inc.