Google beats sales expectations despite economic toll of coronavirus

The coronavirus pandemic continues to take a toll on the global economy, but Google’s parent company Alphabet so far has been weathering the storm. The search giant on Tuesday reported better-than-expected earnings for the first quarter of the year, though it warned of a “significant slowdown” of revenue in March after the global crisis began to take hold.

For the quarter ended March 31, Alphabet tallied $41.15 billion in sales, beating analyst estimates of $40.33 billion, the company said Tuesday. But earnings per share were $9.87, falling short of expectations of $10.33 per share, according to Thomson Reuters.

“Given the depth of the challenges so many are facing, it’s a huge privilege to be able to help at this time,” Sundar Pichai, CEO of Alphabet, said in a statement. “People are relying on Google’s services more than ever and we’ve marshalled our resources and product development in this urgent moment.”

But while the company managed to top expectations for the first quarter, CFO Ruth Porat warned of a slide in sales that could be coming. “Performance was strong during the first two months of the quarter, but then in March we experienced a significant slowdown in ad revenues. We are sharpening our focus on executing more efficiently, while continuing to invest in our long-term opportunities,” she said in a statement. 

Alphabet shares rose more than 3 percent in after-hours trading. 

Google’s advertising revenue, which makes up around 85 percent of the company’s annual sales, was expected to take a hit as marketers across several industries pull back their ad budgets. Travel and entertainment ads, normally plentiful across Google’s platforms, have been especially scarce as people cancel trips and movie studios push back their major movie releases. For example, Expedia, which usually spends $5 billion on a year said it probably won’t crack $1 billion in ads this year.

Tuesday’s earnings report gives investors and the public a glimpse of how the pandemic has affected the company’s business. For weeks, there have been signs Alphabet was feeling the weight of the economic downturn. Earlier this month, CEO Sundar Pichai told employees the company is slowing down hiring for the remainder of the year, as the search giant focuses on a few important categories. 

Pichai has said the company would “dial back” plans in areas that aren’t critical to the company’s success. Alphabet had hired 20,000 people in 2019, he said, and would’ve been poised for similar growth this year. Alphabet is also reportedly cutting its marketing budgets by as much as half for the second half of 2020.