Alphabet CFO warns of another potentially weak quarter

Published Tue, Apr 26 20228:45 PM EDT

Alphabet missed analyst expectations on the top and bottom lines when it reported first quarter earnings Tuesday. It sent the stock sliding about 5% and the company's finance chief warned another rough quarter could be ahead. Google’s Q1 2022 revenue came in at $68.01 billion, growth of 23% from the same period last year. That’s a slowdown from 34% growth in the first quarter of 2021, when the economy was reopening from the pandemic. YouTube ad revenue fell particularly short of analyst expectations, growing 14% instead of the 25%, Wall Street expected. The company doesn’t provide a formal forecast but its Chief Financial Officer Ruth Porat made several statements letting investors know that next quarter may look rocky too. Porat, on a conference call with investors, repeatedly said that she doesn’t expect the headwinds to last through the end of the year, but she did warn next quarter — Q2— results will be impacted by some of the same reasons: the Russian War in Ukraine, tougher comparisons against pandemic highs and changing foreign exchange rates. “The largest impact from Covid on our results was in the second quarter of 2020" she said adding that in the second quarter it "will face a particularly tough comp as we lap the recovery we had in the second quarter of 2021.” Porat added that the Russian invasion and war in Ukraine will affect Q2. "In terms of revenues, the most direct impact suspending the vast majority of commercial activities in Russia as we announced in early March," Porat said. 1% of Google revenues in 2021 was from Russia, she said, adding a "pull-back in brand advertiser spend on YouTube in Europe" became another effect. Porat added that she could not speculate on the war's revenue impact longer-term because it is still ongoing and the full duration is still unknown. Additionally, Porat said the second quarter will be impacted by the foreign exchange rates, which she said will have “an even greater impact on year over year comparisons" in the next quarter. Porat called out the strengthening of the U.S. dollar. Porat also said the company is experiencing “a slight headwind to revenue growth” as its Tiktok competitor product YouTube Shorts' "viewership grows as a percentage of total YouTube time." Porat added it is testing “new opportunities” in Shorts but that it would be a "slight headwind" for the company in the meantime. Michael Nathanson, Senior Research Analyst at MoffettNathanson told executives on the earnings conference call that "We’re hearing there’s emerging concern that TikTok is a competitor to YouTube’s mobile position.”

Ruth Porat, Alphabet CFO

Adam Galica | CNBC