US search engine giant Google has suffered its slowest quarterly sales growth in two years.
This is seen as the latest sign of a global technology downturn, and will futher unsettle investors in the sector.
Google parent Alphabet last night posted a 12% rise in quarterly revenue to just under £58billion.
This figure appears massive, but the Telegraph reports that the performance was its weakest growth in two years.
Profits fell 13.6% to just over £13billion while advertising revenue, earned largely from its search business, rose by 2.2%.
Ruth Porat, chief finance officer of Alphabet and Google, called it a "solid performance".
She told analysts that any apparent weakness could be explained with reference to the prior year's surge in demand, when Google benefited from the coronavirus-induced work-from-home trend following the initial shock of the virus outbreak.
Twelve months ago, revenues had jumped 62% year-on-year.
Google Cloud losses
The fall in latest profits was partly driven by a £249million increase in Google Cloud losses to a total of £1.33billion during the three-month period.
Alphabet also incurred a £1.74billion hit from paying deferred income taxes, as well as having spent £830million on mergers and acquisitions, an increase of £581million on the previous year.
Rivals have recently reported a slowdown in the online advertising market, with both Snap and Twitter reporting weaker-than-expected earnings last week. Microsoft yesterday said it had taken a £83million hit from lower ad spending on its LinkedIn platform.
Sundar Pichai, chief executive Alphabet and Google, which also owns YouTube, said: "In the second quarter, our performance was driven by Search and Cloud.
"The investments we've made over the years in AI and computing are helping to make our services particularly valuable for consumers, and highly-effective for businesses of all sizes. As we sharpen our focus, we'll continue to invest responsibly in deep computer science for the long-term."
Alphabet's second-quarter revenue was ahead of forecasts, sending shares nearly 5% higher in after-market trade in New York.
Investors were relieved that the results were not worse, said Jesse Cohen, senior analyst at Investing.com, who described the quarter as "disappointing . . . across almost all business units".
Advertising spending
Microsoft is less reliant on advertising spending and the strength of its cloud computing business helped profits rise 8% in the second quarter.
Satya Nadella, chairman and chief executive officer of Microsoft, said: "Going forward, digital technology will be the key input that powers the world's economic output.
"Across the tech stack, we are expanding our opportunity and taking share as we help customers differentiate, build resilience, and do more with less."
However, the company was stung by a series of unexpected setbacks.
Foreign-exchange movements cost it £493million and factory shutdowns in China knocked £249million off earnings. Reducing operations in Russia as a result of the war in Ukraine cost the company £104million.
Shares in Microsoft were ahead nearly 4% in after-market trade.
The Telegraph says that the financial health of two of the most influential US tech companies is seen as an important indicator for the broader US economy, which faces an increasingly-bleak outlook due to rising inflation and slowing business spending. Inflation is running at a 40-year high with the consumer price index hitting 8.6% in May.
The US Federal Reserve has rapidly raised interest rates in response, taking them from 0.25% in March to 1.75%. That has hurt tech companies, many of which rely on cheap funding to fuel growth and investment.
FTSE 100
The UK's top share index, the FTSE 100, was up 31 points at 7,337 shortly after opening this morning, following yesterday's flat performance.
Brent crude futures were ahead 0.22% at $104.63 a barrel.
Companies reporting today
- Half-year results: British American Tobacco, Lloyds Banking Group, Provident Financial, Reckitt Benckiser, Rio Tinto, Smurfit Kappa, Unite
- Trading updates: GlaxoSmithKline, Meta, Paragon Banking, Spotify, Wizz Air Holdings