Google parent Alphabet Inc on Thursday reported that profit climbed 20 percent, but the increase fell short of investor expectations, sending shares sharply lower.
Alphabet said that net income hit US$4.2 billion in the first three months of this year, but shares sank 5 percent to US$721.89 in after-market trades that followed release of the report.
Revenue in the quarter rose to nearly US$20.3 billion compared with US$17.26 billion in the same period a year earlier.
The results “represent a tremendous start to the year,” Alphabet chief financial officer Ruth Porat said.
“We’re thoughtfully pursuing big bets and building exciting new technologies, in Google and our Other Bets, that position us well for long-term growth,” Porat said.
In the financial report, Alphabet separates its money-making engine Google from “other bets,” a category that covers the company’s investments in diversifying into areas such as self-driving cars, high-speed Internet and smart homes.
Revenue from Other Bets more than doubled in the quarter to US$166 million, but an overall loss of US$802 million was booked, according to the earnings report.
Alphabet earlier this year briefly vaulted past Apple Inc as the world’s most valuable company, but on Thursday the iPhone maker was well ahead of its Silicon Valley rival in market capitalization.
Alphabet subsidiaries include Google, Nest Labs and Google X labs devoted to big-vision new technologies such as self-driving cars, along with such projects as smart “Google Glass” spectacles, drones, health care and Google TV — none of which has become a major source of income.
Separately, Microsoft Corp reported a 25 percent plunge in quarterly profits as the company navigated away from its role as a software seller to a services model.
Shares of Microsoft, once the world’s largest company, were down 4.3 percent in after-hours trade following the results, which were weaker than expectations.
The US tech giant posted a net profit of US$3.8 billion as revenues dipped 6 percent to US$20.5 billion in the fiscal third quarter to March 31.
Chief executive Satya Nadella said Microsoft was pursuing its shift to business and cloud computing services.
“Organizations using digital technology to transform and drive new growth increasingly choose Microsoft as a partner,” Nadella said in a statement.
“As these organizations turn to us, we’re seeing momentum across Microsoft’s cloud services and with Windows 10,” he said.
The results showed a 2 percent drop in revenue from Windows, the PC operating system which has been the core for Microsoft for years, despite a larger drop in PC sales.
Microsoft said it managed to limit the decline because of a “higher consumer premium device mix.”
The results showed further declines in Microsoft’s smartphone business, which has failed to gain traction against the market-leaders using Google Android and Apple’s iOS operating system. Phone revenues were down a hefty 46 percent from a year ago.
However, Microsoft reported gains for its Office software and in business cloud computing, including a 120 percent revenue surge for its Azure cloud platform for enterprises.
The company also reported a 61 percent gain in revenue for Surface, the company’s branded tablet system, fueled by the introduction of Surface Pro 4 and Surface Book.
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