Alphabet: Google parent company posts 23% decline in profits as expenses rise
Alphabet’s stock fell as much as 4% in after hours trading after it reported it missed analyst expectations and posted a 23% decline in profit as it faces rising expenses.
Google’s parent company posted earnings of $10.12 per share in its third quarter, lower than the $12.42 per share expected. Its quarterly profit fell 23% to $7.07, hurt by investments in research, development, and marketing.
Executives noted that the company’s advertising revenue – the bulk of its profit - hit $33.92bn in quarter three, compared with $28.95bn in the third quarter of last year. Alphabet’s total revenue of $40.5bn beat analyst expectations.
“As we’ve often discussed, we manage our business for the long term and not on a quarterly basis,” the company’s chief financial officer, Ruth Porat, said on Monday. “We remain very focused on continuing to enhance the experience for users over the long term.”
The company also noted its revenues from “other bets” – including subsidiaries like the self-driving car company Waymo – came in at $155m, an increase from $146m in the third quarter of 2018.
It lost $941m during the quarter, up from a loss of $727m a year ago. Still, it maintains strong growth in advertising revenues, noted Nicole Perrin, a principal analyst at eMarketer, which is a “good sign for the bottom line of the ads business”.
The world’s dominant provider of internet search, advertising, and video services, Alphabet has increased spending in recent years on areas including cloud computing and consumer electronics that it views as essential to maintaining its industry leadership.
The disappointing earnings come as Google faces major challenges internally and from outside regulators. In September, 48 state attorneys general announced inquiries into Facebook and Google as calls to break up big tech companies increase. Elizabeth Warren, Bernie Sanders, and other Democratic candidates in the 2020 presidential election have made antitrust issues central to their campaigns.
Meanwhile employees have pushed back against company policies internally, including posting a public petition in August calling on Alphabet not to pursue a contract with US Customs and Border Protection or Immigration and Customs Enforcement. Thousands of employees walked out of the company in 2018 to protest harassment policies.
Reuters contributed to this report