Alphabet’s Profit Is Up, but Company Warns of Difficulties

OAKLAND, Calif. — Until the coronavirus took hold in the United States, Google’s parent company, Alphabet, was marching forward to another predictably strong quarter.

Calling it a “tale of two quarters,” Sundar Pichai, Alphabet’s chief executive, said on Tuesday that the company had been doing well in January and February until a “significant and sudden slowdown” in advertising revenue in March.

The result was a quarter that fell short of Alphabet’s usually stellar results but still exceeded Wall Street’s revenue expectations. Revenue rose 13 percent to $42.1 billion from a year earlier, and net income edged up 3 percent to $6.8 billion, Alphabet said.

On a conference call with analysts, Mr. Pichai said the company planned to be “thoughtful” about spending in the short term. He said Alphabet planned to slow hiring, while adjusting investments in areas like data centers and machine learning and curbing costs for travel and marketing.

Alphabet also plans to reduce its investments in office buildings, halting most of its new construction and acquiring new commercial real estate at a slower pace.

Ruth Porat, Alphabet’s chief financial officer, warned that “the second quarter will be a difficult one for our advertising business” and said the company no longer expected that its work force would grow more than 20 percent in 2020, as it had predicted in January.

In the quarter that just ended, Alphabet hired more than 4,000 employees, bringing its total 123,000.

The pandemic has all but eliminated ads from one of Google’s biggest categories of advertisers: travel booking. Advertisers like Booking Holdings, the parent company of Kayak, Priceline and, and Expedia have said they plan to slash the billions of dollars they spend on Google annually as travel has ground to halt.

Despite the advertising slowdown at Google, Alphabet is still better positioned than most peers. Its shares were up 7 percent in after-hours trading on Tuesday.

Alphabet owns some of the most visited websites on the internet, including YouTube, and search advertising will remain important to marketers because those paid links translate into new business.

Revenue from search ads increased 9 percent to $24.5 billion, while YouTube ad spending increased 33 percent to $4 billion, Alphabet said.

Company executives said users were flocking to Google and YouTube during the crisis. While that might not translate directly into greater revenue, it bodes well for when advertisers are more inclined to spend, the executives said.

Alphabet’s business is more diversified than it was during the 2008 financial crisis, Mr. Pichai said. He pointed to Google’s cloud-computing business, which had a 52 percent increase in quarterly revenue, helped by greater demands from customers for its services, and subscriptions for YouTube.

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