Google’s ad revenue continues to fall, but parent company Alphabet grew revenue by 2.6% in the first quarter

Google’s ad revenue fell for the second consecutive year as the company struggles to navigate economic uncertainty and capitalize on recent advances in artificial intelligence, reports The Wall Street Journal.

Alphabet’s ad revenue was $54.5 billion in the first quarter of 2023, down less than 1% from the same period last year, but the decline was not as sharp as Wall Street had expected. This is the third decline in ad revenue since Google went public in 2004, and the second straight quarterly decline after a 3.6% decline in the fourth quarter.

By comparison, Microsoft’s revenue for the same period rose 7% from a year earlier, better than expected but a second straight quarter below the company’s multi-year trend of double-digit percentage growth.

Google CFO Ruth Porath said the company saw “some signs of stabilization in ad spending,” referring to video platform YouTube, which has seen its third straight quarter of declining ad revenue. The online advertising market remains volatile as companies respond to an uncertain economic outlook. Still, Alphabet’s total revenue rose 2.6% year-over-year to $69.8 billion in the first quarter, helped by continued growth in the company’s cloud computing division.

Google is trying to accelerate growth in a period of intensifying competition in the field of artificial intelligence. Last week Google merged its two main research groups into a unit called Google DeepMind, which it says will significantly speed up research. Google plans to add conversational AI features to its flagship search engine, following a similar move by Microsoft’s Bing.

Sales at Google Cloud’s cloud computing unit rose 28% year-over-year to $7.5 billion in the first quarter, a slower pace of growth than the fourth quarter, but for the first time it posted an operating profit of $191 million.