Google and Microsoft hit by slowing economy

• Posted on October 26, 2022October 26, 2022
• by Nana Kwesi Coomson
• Comment

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% in the three months to September, to $69bn, 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% to $50.1bn, 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.

Profits at Alphabet dropped nearly 30% 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 if market conditions continue to deteriorate.”

Microsoft said it expected demand for its PC and cloud computing technology to continue falling this year as business customers cut back.

Sales in its Xbox video game business have also slumped. 

Big tech firms saw their sales jump in the pandemic as locked-down consumers and workers came to rely more on their technology. But the sector’s fortunes look bleaker in the current climate. 

In recent months, Alphabet has said it was slowing hiring, while Microsoft has cut jobs.

Many other tech companies have decided to lay off staff, including Netflix and Twitter, or slow the pace of recruitment, such as social media platform Snap.

Shares in both Alphabet and Microsoft fell sharply in after-hours trading on Tuesday.

-BBC