Yandex's Q2 profits fall as costs rise versus 2022 'anomaly'

By Alexander Marrow and Gleb Stolyarov

(Reuters) -Russian tech giant Yandex reported a 27% fall in second-quarter profits on Thursday as costs rose from a year earlier when the company tightened spending in the immediate aftermath of Russia's invasion of Ukraine.

Often dubbed "Russia's Google", Yandex has struggled to balance domestic pressures with the interests of its Western investors since Russia sent troops into Ukraine in February 2022.

Yandex's adjusted net income dropped to 9.6 billion roubles ($106.8 million) while its adjusted earnings before income, tax, depreciation and amortisation (EBITDA) fell 4% to 24.7 billion roubles.

"The decline was expected and is due to the fact that the second quarter of 2022 was an 'anomaly' for the whole market," Yandex said, referring to the year-earlier period.

"A year ago, Yandex had strong EBITDA due to a very low base of costs. The company froze hiring, cut part of its marketing budgets and was generally stricter on cost control."

Yandex spent 18.4 billion roubles in the quarter, almost 140% more than a year earlier, it said in a presentation, and notably higher than its average quarterly spend in 2022 or 2021.

Revenue continued to grow, gaining 55% to 182.5 billion roubles, Yandex said, while its e-commerce division's gross merchandise volume (GMV) rose 89% versus a 67% gain last quarter.

Search and portal, for years Yandex's majority business driver, accounted for just 37% of revenue in the quarter, with e-commerce and ride-tech taking 19% and 18% respectively.

Yandex has benefited from the decision by Alphabet's Google to stop selling online advertising in Russia last March, while keeping some free services available.

Yandex said its share of the Russian search market averaged 63.6% in the second quarter.

Yandex's Dutch-registered holding company is advancing plans to divest ownership and control of most of Yandex Group with a corporate restructuring.

Sources told Reuters in May that shareholders in Yandex's holding company, many of whom are Western investment funds, could be in line to make $7 billion from a full divestment of its Russian businesses.

U.S. sanctions imposed last week on Alexei Kudrin, the former finance minister now spearheading Yandex's restructuring efforts, could hamper those plans.

(Reporting by Gleb Stolyarov and Alexander Marrow; editing by Jason Neely, Emma Rumney and Nick Macfie)