Google parent Alphabet Inc reported quarterly earnings beating Wall Street expectations on Monday, but shares slipped, with investors apparently focused on rising costs at the technology giant.
Alphabet reported a profit of US$8.9 billion in the fourth quarter on revenue that was up 22 percent to US$39.3 billion from the same period a year earlier.
“With great opportunities ahead, we continue to make focused investments in the talent and infrastructure needed to bring exceptional products and experiences to our users, advertisers and partners around the globe,” Alphabet chief financial officer Ruth Porat said.
Photo:Bloomberg
Alphabet shares were down 3.3 percent to US$1,103.50 in after-market trades that followed release of the earnings figures from the final three months of last year.
Expenses rose to US$31 billion compared with US$24.6 billion in the same period a year ago.
Another factor making the market wary was a 29 percent drop in “cost per click” or the average price of digital ads, the main source of revenue for the tech giant.
Google commands a lion’s share of the global digital advertising market, especially when it is linked to online searches, but lifestyles have shifted to smartphones and tablets where it makes less money per ad.
And, while video-sharing platform YouTube contributed strongly to revenue, the amount of money spent on content for its ad-supported and subscription offerings grew, according to Porat.
Money spent on Google hardware, such as Pixel smartphones or Nest smart home devices, was also a factor along with investments in data centers essential to Google’s growing cloud computing business.
Porat said a big spending increase was in hiring and compensation of workers, particularly engineers and product managers.
The report offered no detailed breakdown of Alphabet income, but Google took in the overwhelming majority of revenue in the quarter, US$39.1 billion, with US$32.6 billion from advertising.
The company’s “other bets,” including its autonomous driving division Waymo and its life sciences and cybersecurity units, took in US$154 million in revenue. However, those operations showed a US$1.3 billion operating loss.
Alphabet’s head count grew to nearly 99,000 from 80,000 employees during the course of the year as expenses at the Internet colossus climbed.
Google is a key target of “techlash,” with probes in Europe on monopoly abuse in search and advertising on its Android mobile ecosystem, and could be impacted by proposed privacy rules in the US.
“Providing accurate and trusted information at the scale the Internet has reached is an extremely complex challenge and one that is constantly getting harder,” Google chief executive Sundar Pichai said on an earnings call.
“We feel a deep sense of responsibility to do the right thing and are continuing to build privacy and security into the core of our products keeping users data safe and secure with the industry’s best security systems and giving people better and clearer controls,” Pichai said.
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