Google’s parent company Alphabet Inc. reported its slowest sales growth in two years, a sign that one of the tech industry’s biggest property investors is feeling the brunt of mounting economic pressures.

The Mountain View, CaliforniaThe New York-based company said it would end the hiring spree that has fueled record headcount growth and underpinned a string of blockbuster leases and acquisitions over the past two years.

Alphabet reported second-quarter revenue of nearly $69.7 billion on Tuesday, up about 12.5% ​​from the same period last year. This is the slowest growth rate since the second quarter of 2020, when the company announced that it would suspend any real estate development or purchase plans as part of its decision to postpone major investments at the start of the year. pandemic.

“Uncertainty is the best way to characterize what we see,” Alphabet chief financial officer Ruth Porat told investors on the company’s earnings call on Tuesday, referring to a challenging landscape. such as inflation, a decline in advertising spending, fear of an impending recession, and pandemic-induced headaches such as supply chain issues and labor shortages. “Our results continue to reflect the strong growth rates of last year, and on top of that there is uncertainty in the global economic environment and issues that differ from industry to industry.”

Porat went on to say that revenue growth for the rest of the year will struggle to keep pace with the growth achieved by the company in 2021, when Alphabet rebounded beyond pre-COVID-19 revenue levels. pandemic after a brief lull in 2020 following the pandemic.

“Going forward, last year’s very strong revenue performance will weigh on year-over-year growth rates for the remainder of this year,” she said. For example, advertising revenue for the company’s YouTube division rose just 5% in the second quarter of this year, compared to an 84% jump quarter-over-quarter last year.

Still, Google’s parent company is committed to investing in long-term growth. Alphabet plans to strengthen its capital plans for the rest of the year, including focusing on spending on data centers, technical infrastructure, office finishes and groundbreaking work on office projects that already has it going.

For Alphabet CEO Sundar Pichai, the current uncertainty is a time for the tech giant to catch its breath and refine its long-term growth strategy.

“It’s a good time to sharpen our focus and it gives us the chance to digest and make sure we’re working on the right things as a business and taking a long-term view,” the CEO said. . “We’ve had a few years of strong growth, and when you’re in growth mode, it’s hard to take the time to make the necessary adjustments. Now we can double down on our long-term view, and we’ll be very disciplined.”

Faced with headwinds from disrupted digital ad spending and rising inflation, as well as a moderate hit from the war in Ukraine – the company said around 1% of its revenue in 2021 came from sales in Russia, which were suspended earlier this year – Alphabet is adjusting to slower growth rates.

Second-quarter sales fell nearly $200 million from analysts’ expectations. Higher expenses caused net income to decline from the prior year period by more than 13.5% to $16 billion. Porat said the company’s biggest source of increased spending was its job growth.

Alphabet was among the tech companies that reaped record profits during the pandemic, fueling major spikes in hiring and power leases and acquisitions made in anticipation of the gradual return of its workforce to the office. The company said it hired about 10,000 people in the second quarter of the year and now has a global workforce of more than 174,000 people. It employed just under 140,000 people at the end of 2021.

The hiring accelerated the company’s plan to aggressively invest in expanding its commercial real estate footprint across the United States.

Pichai said earlier this month that the company’s investments would focus on a mix of office and data center openings, as well as upgrading existing office space. Some of the corporate hubs he has in the works include an outpost in Atlanta; a location in downtown Austin, Texas that is under construction; a new campus in Boulder, Colorado; expanded campuses in the Boston, Pittsburgh and Seattle areas; as well as a new office in downtown Portland, Oregon.

The company is also building new data centers in Storey County and Henderson, Nevada; Council Bluffs, Iowa; Nebraska; Midlothian, Texas; Tennessee; Virginia; and Oklahoma.

“It may seem counter-intuitive to increase our investments in physical offices even as we embrace greater flexibility in the way we work,” Pichai wrote in a company blog post in early April about his plans to expand. real estate expansion. “Yet we believe it is more important than ever to invest in our campuses and that this will result in better products, a better quality of life for our employees and stronger communities.”


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