Alphabet’s earnings miss profit estimates
TECHNOLOGY
Google parent Alphabet
Inc. missed quarterly profit forecasts despite surprisingly strong sales as higher expenses offset growing demand for price y ads on mobile apps, the U.S. technology company said on Thursday.
Shares of Alphabet dipped more than 4 per cent afterhours to US$1,119.22.
Fourth-quarter sales increased 24 per cent to US$ 32.3 billion, above the average analysts’ estimate of US$31.9 billion, according to Thomson Reuters I/B/E/ S. Adjusted quarterly profit of US$ 6.8 billion, or US$ 9.70 per share, missed estimates of US$7 billion, or US$10 per share.
The profit figure excludes a US$ 9.9 billion tax charge as Alphabet joined much of corporate America in reporting large one- time expenses in the fourth quarter due to U.S. legislation enacted in December that lowers corporate rates.
The growing use of smartphones worldwide has been a bonanza for social media company Facebook Inc and Google, which research firm EMarkter estimates together account for nearly 60 per cent of mobile ad sales.
Facebook said on Wednesday that its ad sales, 89 per cent of which are for mobile devices, jumped 48 per cent in the fourth quarter from the year- ago period even as users spend less time on its main social network.
Google sells ads space on its search engine, its fastgrowing YouTube video streaming service and a network of third-party websites and apps.
The company’s computer algorithms have become more effective at delivering mobile ads likely to make customers sit through commercials, install an app or visit a website.
Led by such ads, Alphabet generated US$ 110.9 billion in full- year revenue, up 23 per cent from 2016 and topping US$ 100 billion for the first time. Profit fell 35 per cent to US$ 12.6 billion because of the tax bill and a separate charge last summer for a US$ 2.7 billion European Union antitrust fine, which is under appeal.
The potential for further regulation on privacy, monopolistic business practices or content vetting is among investors’ top concerns about tech companies such as Alphabet, Facebook and Amazon. com Inc that are tapping their unrivalled consumer behaviour data to branch beyond their core businesses.
Alphabet shares gained more than 30 per cent last year, while the S& P 500 j umped 19 per cent. But some analysts say the sector is undervalued as billions of dollars in transactions shift to apps and websites from stores and other traditional outlets.
MKM Partners analyst Rob Sanderson said in a note to clients last month that Google had “the most unrecognized value” of big publicly traded tech companies despite some concerns about regulatory issues.