Google’s revenue has grown, but Wall Street wants more.
Shares of Google parent company Alphabet Inc fell more than 4 percent after it released financial results on Monday, even as profit rose 19 percent and it beat expectations for the final three months of last year.
Helped by lower taxes, Alphabet on Monday said that it earned US$10.7 billion, or earnings per share of US$15.35, more than the US$12.49 a share analysts polled by FactSet were expecting.
Net revenue, after subtracting advertising costs, was US$37.6 billion, up 18 percent year-on-year.
Analysts were looking for US$38.4 billion.
It was the second rocky quarter in a row for the online search leader.
Its third quarter brought higher-than-expected revenue, but a profit shortfall due to higher spending on new hires, data centers and other expenses.
Wall Street is worried that Google’s weaker-than-expected ad revenue results could indicate a broader slowdown in online advertising spending, Synovus Trust Co portfolio manager Dan Morgan said.
While Google is still the clear leader in the digital advertising market, it is seeing growing competition from the likes of Facebook Inc and Amazon.com Inc.
Google — and with it, Alphabet — makes the majority of its money from selling targeted advertising across the Web, apps and Google products, including its search engine and video streaming site YouTube.
Investors are also closely watching the growth of Google’s cloud business and its aspirations in the healthcare industry. Google agreed to buy the fitness tracker company Fitbit Inc in November last year.
Alphabet disclosed revenue for YouTube and its cloud business for the first time, something analysts have been seeking for years.
“The information should also give advertisers valuable information about the importance of YouTube as a digital ad vehicle,” eMarketer analyst Nicole Perrin said.
Alphabet said that YouTube’s advertising revenue grew 31 percent to US$4.72 billion, while Google Cloud revenue grew 53 percent to US$2.61 billion.
Though it is still No. 3 in the cloud sector, Google is gaining some market share from the likes of Amazon and Microsoft Corp, Morgan said.
Alphabet chief financial officer Ruth Porat said that the quarter’s profit benefited from lower taxes due to several years of audits.
Alphabet set aside US$33 million for income taxes in the quarter, compared with US$1.12 billion a year earlier.
There has been no impact on Alphabet from a coronavirus outbreak in China, she said, adding that the company is helping with relief efforts.
The outbreak could eventually hurt Google’s sales of hardware, such as Chromebooks and Pixel phones, if it continues to spread and becomes a long-term problem, she added.
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