Alphabet Takes $1 Billion Hit in First Quarter — Is YouTube the Culprit?

Alphabet Inc. recently took quite the loss during the first quarter of 2022.

A recent report from The Verge said that Google's parent company suffered more than $1 billion in losses despite its revenue going up by 23% from the same period last year, per Alphabet's Q1 2022 Results announcement.

The company previously went over $200 billion in 2021, earning a $257 billion revenue last year.

Alphabet Inc.'s Loss

According to the company's financial results announcement, it earned an estimated net income of $16.4 billion during the first quarter of 2022.

This increase is largely due to an increase in earnings from various Google services, such as Google Search, YouTube ads, Google network, and advertising.

However, its net income during Q1 2022 was approximately $1.5 billion lower than it was in Q1 2021, which was said to be around $17.9 billion.

The company also saw an increase in operating expenses and research and development costs.

According to Alphabet Inc's announcement, it found that the company lost around $20.1 billion during the first quarter of 2022, which is approximately $3.7 billion more than the operating expenses during the same period in 2021, which was $16.4 billion.

Alphabet Inc. also marked an expense increase for its research and development, with it spending around $9.1 billion for it during the last quarter while it spent approximately $7.5 billion during Q1 2021.

The New York Times also noted that Alphabet Inc. suffered a $1.07 billion loss in its stock holdings during Q1 2022 but saw a $4.8 billion gain in its stock holdings during Q1 2021.

Is YouTube To Blame?

YouTube is not the sole reason for the company's losses, as previously shown. However, it did contribute to the loss.

The reopening of economies and more lenient quarantine measures meant that people would eventually go out, causing YouTube's growth to gradually slow down, per CNBC.

Alphabet expected that YouTube would grow by 25% — a percentage that wasn't met after the company reported a 14% growth during Q1 2022. This growth drop was said to have contributed to the loss Alphabet Inc. reported and the steep drop in the company's stock.

YouTube's slow growth is evidenced by its YouTube advertising revenue of $6.87 billion, which is around $640 million lower than what Wall Street expects it to be per, StreetAccount.

Insider Intelligence analyst Paul Verna said that Alphabet Inc.'s YouTube video business fell short of analysts' forecasts due to increased competition from social video platforms like TikTok and "a plethora of premium entertainment services led by Disney+."

Aside from TikTok taking more of the proverbial pie, other media companies are rolling out video and streaming services to compete for consumer views. However, YouTube released ad-supported TV shows for the first time a month ago, which could help them compete with other companies.

YouTube became one of the most used apps in the world during the initial years of the COVID-19 pandemic when people were stuck in their homes due to various lockdowns and quarantine measures.

Even when economies started reopening and ad spending soared, the video-sharing website continued to grow.