Google CEO Sundar Pichai blames a drop in sales of its Pixel smartphone on 'headwinds' that are putting pressure on every expensive phone (GOOG, GOOGL)

sundar pichai

Sales of the Google-made Pixel smartphone are falling, company executives said in its first quarter earnings call on Monday — further pointing to the tech giant's struggle to build a meaningful hardware business.
Google CEO Sundar Pichai said that Pixel's dropping sales were caused by "year-on-year headwinds" across the smartphone industry.
CFO Ruth Porat said that the Pixel struggles are part of why growth is slowing in Google's "other revenues" unit — which include businesses, like cloud and hardware, that are outside its core ads business.
Growth in Google's "other revenues" slowed from an increase of 35% year-over-year in 2018 to 25% in 2019.
Alphabet's stock is down over 7% in after-hours trading on Monday.
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Sales of the Google-made Pixel smartphone are falling, company executives said in its first quarter earnings call on Monday, further pointing to the tech giant's struggle to build a meaningful hardware business.

Though Google is typically tightlipped around such metrics, CFO Ruth Porat shed light on the Pixel struggles to explain its slowing year-over-year growth for "other revenues" — which include revenue channels, like cloud and hardware, that are outside its core advertising business.

"Hardware results reflect lower year-on-year sales of Pixel, reflecting, in part, heavy promotional activity industrywide given some of the recent pressures in the premium smartphone market," Porat said.

Growth in Google's "other revenues" slowed from an increase of 35% year-over-year in 2018 to 25% in 2019. The tech giant's parent company Alphabet saw its stock drop over 7% in after-hours trading on Monday.

Google CEO Sundar Pichai also commented on Pixel's dipping sales.

"Phones definitely across an industry, I think we are working through a phase where there is definite year-on-year headwinds," Pichai said, never explaining what those "headwinds" actually entail. "But I do think, especially since the ecosystem is constantly pushing it forward, I continue to be excited about the innovation speed."

The chief exec pointed to the rise of the ultra-fast 5G wireless standard and the rollout of the first foldable phones — which he says "Android plays a big part in driving" — as smartphone developments that excite him most.

Recently, Samsung — the first major smartphone maker to release a foldable smartphone — was forced to push back the release date for its device after early reviewers discovered major hardware flaws.

Regarding Google's future smartphone plans, rumors have been swirling that a cheaper version of the Pixel — likely named the Pixel "3a" — will be released in early May.

"We are still in our early days, but our commitment is very strong," Pichai said of Google's hardware business.

The future of hardware for Google

Despite Picahi's optimism, there are still questions about the future of Google's hardware business.

Business Insider recently reported that the company had trimmed the size of its laptop and tablet hardware departments — a move that one source said would "pare down the portfolio" of products the tech giant launched.

The company's smartphone group was not included in the "roadmap cutbacks" that Business Insider reported, though Monday's earnings report shows that the search giant is still having trouble in that area.

Still, despite the Pixel slowing sales, Pichai reenforced the Google's initial reasoning for building its own, in-house hardware — to ensure its "services are presented to users in the way they are intended to be," Pichai said.

Only time will tell if and when Google can actually turn its hardware efforts into a real, sustainable hardware business.

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