Alphabet will likely post its slowest revenue growth in four quarters on Tuesday, hurt by competition that weighed on its core Google Search business and dented YouTube ad spending.
The slowdown in its core business is expected to overshadow AI-driven gains at its cloud-computing business in the third quarter. This quarter was also the company’s first since Anat Ashkenazi took over as finance chief from Ruth Porat.
Alphabet’s long-established dominance of the digital ad market is under threat from the likes of Amazon and TikTok that have become popular with advertisers looking to tap a ready pool of buyers.
The other risk Alphabet faces is from regulators who are considering breaking up Google to loosen what they call its “illegal monopoly” on online search.
Analysts expect Google Search and other related revenue to grow 11.6 per cent in the third quarter, slower than the 13.8 per cent increase in the second quarter, according to Visible Alpha.
“New entrants like Perplexity and ChatGPT are raising billions of dollars on the premise that search can now be disrupted; Google has been seen as slow, unprepared … to the development of GenAI,” MoffettNathanson analysts said.
“Some of this negative narrative will be hard to disprove in the coming year,” the analysts said, adding that they expect significant changes in Google’s ability to maintain its exclusive search advantage on Apple and Android phones in the United States.
In a report earlier this month that raised alarm bells among investors, research firm eMarketer said Google’s share of U.S. search advertising revenue was set to fall below 50 per cent next year for the first time in at least 18 years.
Amazon’s search advertising revenue share in the U.S. is expected to grow to 24 per cent next year, while generative AI rivals such as Amazon founder Jeff Bezos-backed Perplexity AI are also