Google’s parent company, Alphabet, reported an 8 percent decline in quarterly profit on Tuesday. The company’s core business of digital advertising remained strong, but the value of its investments declined from a year earlier, pulling down Alphabet’s overall profitability.
The company posted a net profit of $16.44 billion for the first quarter, compared with a profit of $17.93 billion in the same period a year earlier. Revenue surged 23 percent to $68.01 billion. The results were below analysts’ expectations for a net profit of $17.33 billion on revenue of $68.05 billion, according to estimates compiled by FactSet.
Shares of Alphabet fell 4 percent in aftermarket trading.
Alphabet’s profit fell from a year ago, when the company experienced a major rebound in demand for digital advertising and posted a $4.8 billion gain in its stock holdings. For the first quarter, Google reported a $1.07 billion loss from the value of its investments.
Alphabet’s advertising business continued to grow as the return of economic activity, especially in travel, helped boost demand for ads on search. Throughout the pandemic, Alphabet has also benefited from increased internet activity, which usually means more opportunities for the company to sell more advertising because Google search is often an on-ramp to the web and YouTube is the prime destination for video online.
In the face of Amazon’s growing advertising business, Google has also made changes to how it allows retailers to list available products for online shoppers. Its goal is to get more people to start their shopping searches on Google instead of going directly to Amazon.
In a recent survey, Morgan Stanley found that the percentage of people who start shopping searches on Google and YouTube had increased steadily to 60 percent, up from 50 percent in 2020.