Google’s parent company, Alphabet Inc, shared its first-quarter earnings report yesterday, its first since the World Health Organization declared the coronavirus outbreak a pandemic. The COVID-19 pandemic has pushed businesses to slash the money they spend on ads, and Google—which makes the vast majority of its revenue from ads—is already seeing the impact on its bottom line.
“Performance was strong during the first two months of the quarter, but then in March we experienced a significant slowdown in ad revenues,” said Ruth Porat, Alphabet and Google’s chief financial officer. Internally, the company has responded with warnings of hiring freezes and budget cuts, CNBC reports.
While Alphabet missed analysts’ expectations for earnings, the company brought in more revenue than expected ($41.2 billion versus $40.3 billion). Nicole Perrin, principal analyst for eMarketer, described the hit to Google’s ad revenue as serious but “not as severe as it could have been.” In after-hours trading, Alphabet’s stock price initially rose by more than 4%.
Here are the key numbers for Q1 2020:
Revenue: $41.16 billion (versus $40.29 billion expected, per CNBC)
Earnings per share: $9.87 (versus $10.33 expected)
YouTube ad revenue: $4.04 billion (versus $4.14 billion expected)
Cloud revenue: $2.78 billion ($2.81 billion expected)
The turmoil in the ad industry puts a brighter spotlight on the money Alphabet makes elsewhere. Google’s vaguely named “Other Revenue,” which includes the money made from Pixel phones, Google Play, and Google Nest-branded devices, hit $4.44 billion in the first quarter of 2020, versus $3.6 billion in the same quarter last year. Meanwhile, Alphabet’s Other Bets (which include self-driving cars, Verily Life Sciences, and Loon) brought in $135 million in revenue in the first quarter, versus $170 million last year.
Today marks the second time Alphabet has broken out how much money it makes from YouTube ads and its cloud businesses. It’s also the second report since Google’s co-founders Larry Page and Sergey Brin announced Sundar Pichai would be the new CEO of Alphabet. While Page and Brin have technically dropped out of the spotlight, they remain on the board and possess voting control over the company.
Article originally published on fastcompany.com.