Google’s growth drops to 13% after a pharaonic 2021

Slight brake for Google. After two years of pharaonic growth fueled by the pandemic (+62% in 2021), Alphabet – Google’s parent company – is returning to more modest standards, and even lower than those before the Covid. In the second quarter (from May to June), the group achieved 69.69 billion dollars in turnover (69.66 billion euros) only » 13% more than last year. This is its weakest growth since the second quarter of 2020 – when advertising budgets collapsed – and 6 points less than in 2019.

Despite this slowdown, the markets welcomed the announcement of the results with a rise of more than 4% in its price in post-closing electronic trading. For good reason: the group outperformed expectations, which were gloomy given the state of the online advertising market, from which Google derives 80% of its turnover. On the other hand, this return to normal prompted the company to temporarily freeze its recruitments while it reviewed its priorities, while it was recruiting with a vengeance (+21% of employees in 2021).

The predicted disaster was averted

Last week, Snap, another company dependent on advertising revenue, also announced a slowdown in growth, and it had collapsed 33% at the opening of Wall Street the next day. Twitter had meanwhile stagnated, which foreshadowed a crisis in the sector. Both had justified their disappointing results by difficult macroeconomic conditions (inflation, war in Ukraine, commodity crisis, specter of a recession, etc.). Google echoed them, citing the disruption of its activities in Russia » and macroeconomic conditions that drastically reduce advertising budgets ».

But where Snap and Twitter each weigh less than 1% of the market, Google absorbs nearly 30% of advertising revenue, to the point of being seen as a barometer of the sector. And while the two aforementioned still do not generate profits, Google made 16 billion dollars (15.77 billion euros) in net profit in the second quarter alone. This number is certainly down 14% compared to last year, but it places the company among the most profitable in the world. In other words, Alphabet remains a safe bet, and the turbulence in its main market is not significant enough to unbalance it.

In detail, Google grew by 13.5% on Search (revenues linked to its search engine) compared to last year, but by only 4.8% on YouTube, its video streaming platform. The latter suffers in particular from the competition of TikTok on short content, and that of Twitch on live.

Diversification that has yet to bear fruit

In parallel with advertising, it is Google Cloud, the division dedicated to dematerialized computing, which is driving the growth of the group with 6.28 billion dollars in turnover (6.19 billion euros), i.e. 36% more than last year. It must be said that the company continues to invest massively in the sector, with for example the opening of data centers in France. It has the ambitious objective of catching up on the cloud market, where it holds a solid 3rd place (with around 10% of the shares) far behind the leaders Amazon Web Services and Microsoft Azure. As a result of this strategy, Google Cloud once again posted a net loss, this time at 858 million dollars (845.8 million euros), and it will be necessary to draw its balance sheet in the medium and long term.

Another pillar of the group’s diversification: its great return to the product market. In May, Google presented its new Pixel range (smartphone, headphones, watch, tablet, etc.), expanded on the model of the Apple range (iPhone, AirPods, iWatch, etc.). But difficult to draw the balance sheet of this strategy. First, because not all the announced products have yet been released, and second, because the company does not dedicate a specific line to them in its financial results. In Google other »which includes products, among other things, it posted 6.55 billion in turnover, down slightly from last year.

These two new businesses are important for the future of Google in the medium term, because according to several analyst firms such as Insider Intelligence, the growth of the online advertising market will continue to slow (barely 6% in 2026), while ‘it’s approaching saturation point. To stay on course, the tech giant will therefore have to rely on other engines.