Google and Microsoft hit by slowing economy

Thursday, October 27th, 2022 06:00 | By
Google. PHOTO/Print
Google. PHOTO/Print

Sales at the tech giants Alphabet and Microsoft have slowed sharply, adding to fears of a downturn in the economy. Alphabet, which owns Google and YouTube, said sales rose just 6 per cent in the three months to September, to $69 billion (Sh8.3 trillion), as firms cut their advertising budgets. It marked the US firm’s weakest quarterly growth in nearly a decade outside of the start of the pandemic.

Microsoft meanwhile said demand for its computers and other technology had weakened. Its sales rose by 11 per cent to $50.1 billion, marking its slowest revenue growth in five years.

Consumers and businesses around the world are cutting back as prices rise and interest rates go up, fuelling fears of a global recession.

A strong US dollar has also hurt American multinationals, making it more expensive to sell products abroad.

Decline in ad revenues

Profits at Alphabet dropped nearly 30 per cent to $13.9bn in the quarter, as YouTube ad revenues declined for the first time since the firm started to report them publicly. Sales growth at the firm has slowed for five consecutive quarters.

Boss Sundar Pichai said that Alphabet was “sharpening” its focus and “being responsive to the economic environment”.

“When Google stumbles, it’s a bad omen for digital advertising at large,” said Evelyn Mitchell, principal analyst at Insider Intelligence, noting that Google’s core website has in the past been more resilient to ad spending downturns than social media sites like Facebook or Snap.

“This disappointing quarter for Google signifies hard times ahead.” Microsoft said it expected demand for its PC and cloud computing technology to continue falling this year as business customers cut back.                            - BBC

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