Alphabet beats earnings forecast, but costs weigh on shares

06 February, 2019, 05:27 | Author: Kevin Carter
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The report offered no detailed breakdown of Alphabet income but Google took in the overwhelming majority of revenue in the quarter, $39.1 billion, with $32.6 billion from advertising. That was the same growth rate as reported for last year's fourth quarter, which worries some analysts.

While operating income was up from $7.664 billion to $8.203 billion year-over-year for the three months ending December 31, 2018, the operating margin also fell three-percent to 21-percent.

Google parent Alphabet Inc. reported thinner profit margins as the internet giant spent heavily to expand its cloud and YouTube businesses.

Google is asking investors to trust that investments in future growth will pay off, but the company discloses limited financial details on its newer initiatives. The internet behemoth delivered $31.85 billion and earnings per share above expectations at $12.77. Alphabet doesn't break out the amount of money it makes with Pixel phones and Home smart speakers, but the company's non-advertising revenues grew from around $5 billion in Q4 of 2017 to $6.5 billion in Q4 of 2018. About 83 per cent of the revenue came from Google's ad system, chiefly mobile search and YouTube, the company said on a call with analysts.

Google Cloud also drove higher expenses, mostly headcount, which rose from the third quarter by nearly 4,400 people, to 98,771.

One stunning number is telling about Google's effectiveness as a business. "We'll continue down this path". Facebook results beat Wall Street estimates last week.

More news: Watch the Dallas Maverick introduce Kristaps Porzingis live on FSSW

Late a year ago, Google brought in former Oracle Corp. executive Thomas Kurian to lead its cloud business into what it hopes to be a rapid growth stage. Among the more damaging of those was its work on a China-specific search engine which ultimately caused questions to be raised by the U.S. government.

Shout out to Google Cloud Google CEO Sundar Pichai singled out Google Cloud for praise on the earnings call, along with outgoing CEO Diane Greene.

Ad revenue growth, as always, will be paramount to investors, while the company's "Other Bets" segment is expected to rise by more than a third.

While Alphabet relies on Google's advertising business to generate profits, YouTube and cloud computing are costlier operations than its traditional desktop businesses.

Alphabet's cash and other short-term holdings totaled $109.14 billion at the end of 2018. This year's earnings per share are expected to rise a modest 7% due in part to a comparison with 2018, which had almost $6 a share in equity gains.

'Acquisitions are an attractive complement to what we do to drive organic growth. Most of those were engineers and product managers, with cloud the biggest-growing segment, Porat said.

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