The digital-advertising industry is beginning to show signs of fragility as search company Google reported its fifth consecutive quarter of slow sales growth.

Youtube, which figures among one of Google's core properties, has also indicated a drop in advertising revenues this quarter.

Other companies in the industry include Microsoft  Corp. (-7.63%), which likewise reported on Tuesday its worst quarterly earnings in more than two years, and tech company Texas Instruments (TXN -3.80%) said it was seeing a slower demand from industrial and individual buyers. 

Google's parent company, Alphabet Inc., racked up $69.1 billion in the third quarter, which highlights a meager increase of 6.1% in the same period last year. 

Analysts blame that an increase in the number of employees by almost 12,800 workers in the quartet caused Alphabet's shares to drop more than 6% in after-hours trading. 

In a call with analysts after earnings were announced, CEO Sundar Pichai said, "Times like this are clarifying."

Google is beginning to incentivize itself through programs of "realigning resources to invest in our biggest growth opportunities," Pichai said, adding that employment growth will be "significantly lower" in the fourth quarter.

This marks Alphabet's lowest revenue growth since the second quarter of 2020 when the effects of the pandemic had a heavy toll on global markets and sparked fears among advertisers, from which Google gets its main supply of revenues. 

Related News

Samsung to invest $310bln in AI, semiconductor expansion

Saudi Arabia's new goal: Becoming an AI hub to support US tech

In comparison to last year, the sales rose to 41% in the third quarter. 

Despite that the tech giant tries to encourage big brands toward a suite of automated tools for purchasing advertising across the company’s own properties, Google reported revenue of $39.5 billion in the third quarter, which highlights a meager increase of 4.3%.

"This is a weak result," according to Mark Mahaney, an analyst at Evercore ISI, who added that it is "probably a very good indicator of expanding caution and weakness among small-business marketers."

As for ad revenues from Google’s YouTube video platform, they fell 1.9% to $7.1 billion.

As YouTube relies more on big brand advertising than other features of Google’s business, it makes it more susceptible to spending drawbacks.

Although Google remained relatively shielded from the privacy changes that Apple Inc. introduced last year, the wider economic cutback prompted Pichai to look for alternative ways to better the company’s bottom line after a sudden increase in revenues during the pandemic triggered a period of headlong expansion.

The CEO said in July that Google would slow hiring until the end of this year, and in September he said the company should become 20% more productive without adding further details. 

In September, Google cut back on investment at an internal startup incubator and shut down its streaming videogame service, Stadia. 

As for revenues from Google’s cloud-computing division, they increased by 37.6% to $6.9 billion, growing slightly faster than in the second quarter of this year.

See this: Google just set up a tech school in an Israeli university