Alphabet third quarter results fall as giant struggles to compete with TikTok

The company reported a third quarter revenue of $69bn, up 6% from last year but lower than analyst estimates of $70.9bn. Like many tech and social media firms, Alphabet is struggling to compete with TikTok amid a broader economic downturn.

Shares were down more than 5% in after hours trading as the results bolstered ongoing concerns about the impact of recession fears and other macroeconomic headwinds. The miss comes after poor results from its smaller rival Snap sparked inflation fears in the tech sector and temporarily wiped out $40bn in market capitalization.

YouTube ad revenue in particular shrank for the first time since the company started reporting YouTube earnings separately in late 2019, falling about 2% to $7bn from $7.2bn this time last year.

Alphabet in August announced it would slow and even freeze hiring in some departments in response to these concerns. Chief financial officer Ruth Porat said in a call with investors on Tuesday that the slowdown will not become apparent until 2023. The company added nearly 13,000 employees in this quarter and expects to add less than half of that in the upcoming quarter.

The report comes as the tech sector makes a departure from years of gains throughout the pandemic. Microsoft also reported lower-than-expected earnings on Tuesday, with a 14% drop in profit for the July-September quarter compared to the same time last year.

With the ongoing slowdown and the difficult results from Alphabet, investors will be keeping a close eye on other tech giants this week as Meta, Amazon, Apple and Uber also share results in coming days.

Reuters contributed to this report