Google keeps the dazzling lights on

accomplishment for a company with more than $125 billion in yearly revenue. As was true with fellow tech superpower Amazon last week, Alphabet’s expenditures are growing at an even faster pace than its sales. Operating costs increased by 27 per cent from a year ago, the steepest increase in years. The disclosure about Alphabet’s spending seems to have contributed to a slight decline in the company’s share price in after-market trading.

Where is Google’s parent company directing all that spending? Well, the company doesn’t say specifically, but it has numerous research and development costs — think engineers and other investments in everything from Google’s cloudcomputing is the annual revenue of Google operation to artificial intelligence technology and consumer hardware development labs. Google also picked up its outlays on capital projects such as computer centres and real estate after a bit of a breather in the first half of the year. As with Amazon, investors have to make an assessment about whether Google’s investments are justified. Mostly, it’s hard to quibble with the company’s track record of turning spending into product changes large and small that generate sales, and (potentially) projects that might become Google’s next big thing.

The trouble with Alphabet is always transparency. The company doesn’t provide outsiders much insight on either what is perking up revenue at the company, or where all of its spending is going. That makes it tough to assess the return on the company’s investments.

Much of this work isn’t the type of awe-inspiring technology advances that grab headlines, but it is Google’s magic. Investors for now have to look at the continued healthy sales gains as vague proof that whatever is happening under Google’s hood will continue to dazzle.