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Google-parent Alphabet’s profit slips as growth slows

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Big tech firms, including Google's parent Alphabet, are grappling with multiple problems, from inflation to the war in Ukraine
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Google-parent Alphabet on Tuesday reported its profit in the recently ended quarter slipped to $16 billion as its long sizzling ad revenue growth cooled.

Big tech firms are grappling with multiple problems, from inflation to the war in Ukraine, and results for this quarter have not been great so far.

Alphabet’s revenue in the period grew 13 percent to $69.7 billion, with its global search and cloud computing services bringing in most of the money — but this was under analysts’ expectations.

“As we sharpen our focus, we’ll continue to invest responsibly in deep computer science for the long-term,” Alphabet chief executive Sundar Pichai said in the earnings release.

The internet giant’s stock was up about 2.5 percent in after-hours trading, as the market appeared relieved by the results.

Alphabet profit was some $2.5 billion higher in the same quarter a year earlier, but the flow of online ad dollars that fuels the company’s fortunes has slowed as inflation, war and other troubles vex the overall economy.

Google was also paying more to acquire online “traffic” from which it makes money, the earnings report showed.

Meanwhile, revenue from ads on video-sharing platform YouTube was up only slightly in the quarter. Google has looked to YouTube as a source of growth as people spend growing amounts of time looking at online videos.

“In the second quarter our performance was driven by Search and Cloud,” Pichai said.

Earnings season has gotten off to a rough start with less than stellar news from both Netflix and Snapchat’s parent firm, a decidedly different world than seen during the pandemic surge.

Netflix reported last week losing subscribers for the second quarter in a row as the streaming giant battles fierce competition and viewer belt tightening, but the company assured investors of better days ahead.

The loss of 970,000 paying customers in the most recent quarter was not as big as expected, and left Netflix with just shy of 221 million subscribers.

The company said in its earnings report that it had expected to gain a million paid subscribers in the current quarter.

At the same time, Snapchat’s owner announced plans last week to “substantially” slow recruitment after bleak results wiped some 30 percent off the stock price of the tech firm, which is facing difficulties on several fronts.

Snap reported that its loss in the recently ended quarter nearly tripled to $422 million despite revenue increasing 13 percent under conditions “more challenging” than expected.

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EasyJet hit by aviation disruption but slashes loss

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EasyJet said it was hit by "short-term disruption issues", but that it was experiencing "the return to flying at scale"
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British airline EasyJet on Tuesday said it took a sizeable financial hit from sector-wide disruptions, notably staff shortages, but still slashed quarterly losses as demand recovers.

As airport staff shortages spark flight cancellations, EasyJet said in a statement that it booked a one-off charge totalling £133 million ($160 million).

That saw the airline post a pre-tax loss of £114 million in the group’s third quarter, or the three months to the end of June.

However, that marked a major improvement from a loss of around £318 million for the same period of last year, as travel demand picked up from a Covid-induced downturn.

Third-quarter revenue increased more than eight-fold to £1.8 billion, while traffic rebounded close to pre-Covid levels. 

EasyJet chief executive Johan Lundgren said the carrier was hit by “short-term disruption issues”, but that it was experiencing “the return to flying at scale”.

Traffic surged more than seven-fold to 22 million passengers in the quarter after the lifting of Covid travel curbs.

That was almost 90 percent of the group’s 2019 capacity, before the pandemic ravaged the global aviation sector by grounding planes worldwide.

EasyJet said “the unprecedented ramp-up across the aviation industry, coupled with a tight labour market” had caused “widespread operational challenges culminating in higher levels of cancellations than normal”.

Despite the disruption, EasyJet operated 95 percent of its planned schedule in the quarter.

Airlines and airports are struggling to recruit staff having sacked thousands of workers as the world entered Covid pandemic lockdowns. 

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Shopify cuts staff as tech firms tighten belts

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Shopify says that growth in online shopping remains strong, but that a surge driven by pandemic lifestyles has proven temporary.
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Canadian e-commerce platform Shopify laid off about 10 percent of its workers Tuesday as a pandemic-driven boom in online shopping has waned.

The reduction in workforce came while US tech giants scale back or even pause hiring due to economic conditions roiled by inflation and the war in Ukraine.

Most of the layoffs would be in areas not involved in building products, Shopify chief executive Tobias Lutke said in an email to employees that the firm posted online.

Shopify beefed up its team as online shopping boomed during the pandemic, gambling that the lifestyle shift would remain even when restrictions eased, Lutke told workers.

“It’s now clear that bet didn’t pay off,” Lutke said. “The next part of the journey will involve fewer teammates than we have picked up along the way.”

Based on the firm’s previous reporting of about 10,000 employees, the job cuts appear poised to impact about 1,000 workers.

The rate of online shopping is about where data projected it would be had there not been a pandemic, Lutke told employees.

“Ultimately, placing this bet was my call to make and I got this wrong,” Lutke said.

Shopify provides merchants and creators tools to set up online shops of their own, with payments, marketing and other features built into the platform.

From Amazon to social networking star Facebook, US tech firms that once grew with abandon have reined in hiring to endure tumultuous times.

Internet giants that saw business boom during the pandemic have taken a hit from inflation, war, supply chain trouble and people returning to pre-Covid lifestyles.

Corporate belt-tightening was a common theme as big tech firms reported earnings from the first three months of this year, and could be focused on anew as second-quarter earnings are reported in coming days.

Snapchat’s owner plans to “substantially” slow recruitment after bleak results disclosed last week caused the share price to plummet.

Snap reported that its loss in the recently ended quarter nearly tripled under conditions “more challenging” than expected.

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VW’s new CEO faces twin challenges of Porsche, software problems

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Serial technical troubles at VW, as well as fractious relationships with workers' representatives spelled the end of the road for Herbert Diess as chief executive, who was ousted in a supervisory board coup
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When Oliver Blume ascends to the top job at German automaker Volkswagen in September, he will be faced with taming the challenges that led to the fall of his predecessor, Herbert Diess, last week.

Serial technical troubles at Europe’s largest carmaker, as well as fractious relationships with workers’ representatives spelled the end of the road for Diess as chief executive, who was ousted in a supervisory board coup.

Blume is moving up from Porsche, VW’s premium sports car brand, which is set to go public later this year during a turbulent time for markets.

In his four years at the helm of Volkswagen, 63-year-old Diess steered the legacy carmaker out of its 2015 “dieselgate” emissions-cheating scandal onto an ambitious programme to become the world’s biggest electric car manufacturer by 2025.

But difficulties at VW’s software arm, Cariad, a pet project of Diess’s, have delayed key plans and made it harder to catch up with competitors like US manufacturer Tesla.

Software is the “number-one challenge”, said Matthias Schmidt, an auto analyst based in Berlin.

Bringing software development in-house, shedding outside suppliers and keeping control of computing architecture of the car, is difficult to achieve, but has potentially huge financial benefits.

Blume “needs to decide whether he will continue to follow Diess’s plan” or make a strategic decision to “buy it in” and “live with the consequence of seeing that potential profit centre vanish”, Schmidt told AFP.

“The idea of doing everything in a centralised way will probably be rethought,” said German automotive expert Ferdinand Dudenhoeffer.

– Unanimous vote –

In addition to the troubles at Cariad, Diess’s position as CEO was weakened by running battles with workers’ representatives.

The tendency of Austrian-born Diess to rub people up the wrong way and the proliferation of internal spats were the main reason for his exit, according to a source at the carmaker.

There were no dissenters on the vote to finally eject him, just before the start of the summer holidays.

Diess “had enemies” and was “not liked by the politicians or the works council” represented on the supervisory board, Dudenhoeffer said.

The outgoing CEO’s propensity for conflict was “very important” to get the group to face up to its past and find a new direction, he said.

But the task at hand was to carry out the changes Diess had identified as necessary, not to keep bashing heads together, Dudenhoeffer added.

– ‘Cooperative’ –

Blume is likely to steer clear of the provocative comparisons with US competitors and strongly worded tweets that won Diess few friends.

The new chief, who has spent his entire career at Volkswagen, is more “cooperative” than Diess, who was hired from rival German carmaker BMW, Dudenhoeffer said.

Chief financial officer Arno Antlitz will bring continuity to the top team at Volkswagen, adding chief operating officer to his portfolio of roles.

Blume will “continue Diess’s big strategic projects”, said Dudenhoeffer, including making VW’s own batteries, building a modern factory close to its headquarters in Wolfsburg and developing mobility services with the reacquisition of rental company Europcar.

Blume will take the steering wheel of the group on September 1, while also retaining his CEO role at Porsche, which is set for a stock market entry in the last three months of 2022.

Blume would likely stay at Porsche through the flotation before having to “concentrate on managing the VW group machine”, said Schmidt.

The future CEO “will be judged on VW’s success in China” and the US, two key markets where Volkswagen has struggled in recent times, said Dudenhoeffer.

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