Tech giant Alphabet, the parent of search engine leader Google, saw its earnings performance miss expectations for Q3 2022 largely due to a fall in digital ad sales.

Alphabet did well during the pandemic when the world turned to digital portals but, as things return to normal, there has been a slowdown in online ad spend, particularly by financial services companies.

YouTube, also owned by Alphabet and a favourite of influencers and those seeking to position themselves in the media space, also saw a drop off in ad revenue as Tik Tok continues to bite into its dominance.

YouTube’s revenues have fallen to US$7.07 billion from US$7.21 billion for the same period last year. YouTube was expected to bring in US$7.42 billion for the quarter under review.

Google’s total advertising revenue came in at US$54.48 billion, a slight improvement on last year’s figure. Alphabet’s total revenue for Q3, 2022 stood at US$69.09 billion while net income was US$13.91 billion compared to US$18.94 billion for the corresponding period last year. Its operating margin fell to 25 per cent in the third quarter from 32 per cent in the previous year.

Earnings per share was US$1.06 and were expected to be US$1.25.

The big winner for Alphabet was Google Cloud, which raked in US$6.9 billion, a significant improvement on the US$5 billion it pulled in for the same period last year.

Last week, Google’s rival, Snap, saw US$40 billion wiped out in market capitalisation as big tech companies continue to be hit by inflation, reduced consumer spend, imminent recession and their businesses entering the maturing phase.

Alphabet’s shares have dropped seven per cent on this Q3 report to around US$98 and only registered six per cent growth compared to 41 per cent last year.

So, what is Alphabet going to do to reverse this slump?

It intends to cut back on its employee numbers and reduce new product offerings. Alphabet employs around 187,000 people, up from 150,000 last year.

Taking on new staff is unlikely now.

Alphabet CEO Sundar Pichai said: “Headcount additions in the fourth quarter will slow to less than half the numbers added in Q3. Our actions to slow the pace of hiring will become more apparent in 2023. Talent is the most precious resource.”

Slowing growth sales sees Alphabet now back at 2013 levels.

Pichai continued: “We’ve sharpening our focus on a clear set of product and business priorities. Product announcements we’ve made in just the past month alone have shone that very clearly, including significant improvements to both Search and Cloud powered by AI and new ways to monetise YouTube Shorts. We are focused on both investing responsibly for the long term and being responsive to the economic environment.”