After the Q1 report by Alphabet failed to deliver on all expectations, Alphabet shares fell more than 3% Wednesday in premarket trades

Google, the owner, reported a Q1 EBITDA of $24.62, below consensus estimates of $25.91 per share. According to Refinitiv, the figure was $68.01 Billion, which is 23% more than the same period last year but less than the estimate of $68.11 Billion.

The YouTube advertising revenue was $6.87 Billion in this period. This is well below analyst estimates of $7.51 Billion. Google Cloud generated $5.82billion in revenue, surpassing the estimate of $5.76 billion.

Alphabet reported traffic acquisition expenses (TACs) of $11.99Billion. This is a decrease from the $11.69B expected. The quarter’s advertising revenue was $54.66 billion, which is compared with $44.68 billion the previous year.

YouTube suffered a particularly bad quarter after experiencing rapid growth due to the coronavirus epidemic, forcing users not only to be at home but also to spend more time online.

YouTube rival TikTok, however, had an especially strong quarter and seized a larger share of the social media market. YouTube’s timid growth was mostly in direct response adds, according to Alphabet CFO Ruth Porat.

Google’s cloud unit showed the strongest results in the period, recording a 44% growth as more enterprise clients move their workloads to the cloud. The report revealed that the operating loss for the division was $931 million. This is down from the $974 million recorded in the previous year.

Morgan Stanley Analyst Brian Nowak reduced the price target from $3,450.00 down to $3,270.00. This was to take into account lower EBITDA estimates for 2023 by approximately 3%.

An analyst identified two main reasons for a weaker than expected print.

“GOOGL’s weaker than expected paid search growth (vs us) likely speaks to weaker than expected e-commerce growth. Given the high and rising importance of e-commerce to driving the online ad markets we continue to believe the relationship between e-commerce and online advertising is important to watch,” Nowak said in a client note.

BofA analyst Justin Post also lowered the price target to $2,940.00 from $3,173.00 after “mixed” results reflected a more difficult environment and tough comps.

“We expect more mixed trends in 2022 as search growth slows and hiring/opex increases. However, vs peers, Alphabet has a more stable business, artificial intelligence (AI)/ machine learning (ML) advantages across the product stack (Performance Max a positive), significant expense flexibility, a mgmt team doing more for shareholders under new CEO (ie buybacks) and potential valuation support,” Post said.

The analyst noted still “attractive” valuation for Alphabet, especially in relation to .

By Senad Karaahmetovic