Worries spread throughout the digital media industry on Tuesday as advertisers cut back on their spending in the wake of an economic slowdown as a result of Google parent Alphabet Inc.'s dismal ad sales.

Alphabet criticised advertisers' declining YouTube spending, said Google's financial services expenditure was cooling, and announced intentions to reduce hiring by more than half.

The unfavourable outcomes dashed many hopes that Google, the largest digital advertising platform in the world by market share, would maintain its strength in a faltering economy. They also fueled concerns on Wall Street that inflation will continue to depress advertising expenditure. The IT industry experienced inflation fears last week as a result of smaller rival Snap Inc.'s slower-than-ever sales growth rate, which temporarily reduced the market value by $40 billion.

Alphabet's stock decreased 6.5% in after-bell trade.

The poor performance of Alphabet should worry other businesses in the industry, especially advertising-dependent Meta Platforms. The parent company of Facebook saw its shares fall 4.5% on Tuesday ahead of its results report on Wednesday.

Alphabet's chief financial officer, Ruth Porat, attributed the slowdown in total advertising income to the previous quarter's "very strong performance," and noted that some advertisers' reduced ad spending was the cause of decreased YouTube ad sales.

According to Alphabet, businesses that provide financial services like insurance, mortgages, and cryptocurrency reduced their ad spending. Google Search's ad income increased thanks to travel and retail sponsors.

In the third quarter, Google's advertising income was $54.48 billion, down from $53.13 billion the year prior but still higher than analysts had anticipated.

According to the corporation, overall sales for the three months ending September 30 was $69.09 billion, up from $65.12 billion in the same period last year.

Refinitiv data shows that analysts anticipated revenue to be $70.58 billion on average.

Additionally, YouTube's ad sales decreased to $7.07 billion from $7.2 billion in the same quarter last year.

From $18.94 billion, or $1.40 per share, a year earlier, Alphabet's net income decreased to $13.91 billion, or $1.06 per share. Analyst estimates for net income were $1.25 per share.Operating margin for the company decreased from 32% in the previous year to 25% in the third quarter.

Due to the fact that it was "not immune to economic headwinds," the tech giant said in July that it will slow the pace of hiring for the remainder of the year. In the third quarter, the company hired 12,700 individuals, according to Porat, and it anticipates hiring fewer than half that amount in the fourth.

From $5 billion a year earlier, Google Cloud's revenue increased to $6.9 billion during the quarter. Alphabet CEO Sundar Pichai stated on a conference call with analysts that the business would continue to assess its projects and make "course corrections" as necessary. He replied, "Times like this are clarifying”.