Google parent company Alphabet Inc on Monday reported mixed third-quarter results, beating analyst expectations for revenue, but falling short on profits. The stock fell more than 2 percent in after-hours trading.
Still, the company met growth expectations for its key moneymaking businesses — notably its advertising business, which reported revenue that increased 17 percent to US$33.9 billion during the quarter.
However, Alphabet’s capital expenditures grew at the same time, rising to US$6.7 billion in the period as Google continued to expand its headquarters and build data centers for its cloud computing business.
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 closely watching the growth of Google’s cloud business.
“I am extremely pleased with the progress we made across the board in the third quarter, from our recent advancements in search and quantum computing to our strong revenue growth driven by mobile search, YouTube and Cloud,” Google chief executive officer Sundar Pichai said in a statement.
Google does not break out its quarterly cloud-computing revenue, but lumps it into an “other revenue” category, with products such as hardware and Google app store purchases. Revenue for that category grew to US$6.4 billion from US$4.6 billion last year.
Chief financial officer Ruth Porat said the quarter was “unusually” active for hiring, as Google brought on nearly 6,500 employees during the period.
While that number covers companywide hires, Google has made it clear that hiring engineers and especially sales workers for its cloud business is a priority.
Overall, Alphabet reported a profit of US$7.1 billion, or earnings per share of US$10.12 — significantly below the US$8.7 billion expected by analysts polled by FactSet.
Quarterly revenue rose 20 percent to US$40.5 billion — slightly above the US$40.3 billion expected by Wall Street, although total expenses grew faster, rising almost 25 percent to US$31.3 billion.
Alphabet’s Other Bets division, which includes long-term aspirational projects such as self-driving car company Waymo and drone delivery company Wing, reported increased revenue of US$155 million, but a growing loss of US$941 million.
Alphabet is in talks for a potential acquisition of smartwatch maker Fitbit Inc, a move that could bolster its hardware business, while also increasing antitrust scrutiny, a person familiar with the deal said.
Reports of the talks earlier on Monday sent Fitbit’s stock up as much as 41 percent, but Alphabet chief financial officer Ruth Porat declined to comment on whether the two companies are in discussions.
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