Alphabet 2018 Earnings Report Shows Continued Growth In Wake Of Controversies

Alphabet 2018 Earnings Report Shows Continued Growth In Wake Of Controversies

Alphabet 2018 Earnings Report Shows Continued Growth In Wake Of Controversies

Alphabet Inc's fourth-quarter revenue and profit beat Wall Street's expectations on Monday but sharply higher spending, as it added data centers, cloud engineers and marketed its services heavily during the holidays, anxious investors.

Alphabet's "other bets", which encompass non-Google companies such as self-driving auto startup Waymo and smart-home company Nest, lost $1.3 billion compared with just under $750 million in the year-ago quarter.

Alphabet's fourth-quarter revenue rose 22 percent from a year ago to $39.28 billion, compared with Wall Street's average estimate of $38.93 billion, according to IBES data from Refinitiv.

Higher traffic acquisition (TAC) costs are also a potentially damaging factor, but as a percentage of total revenue, the 23% figure is actually lower than in the fourth quarter of 2017.

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.

Alphabet is relying on its ad business to support sales and profit growth as it develops new offerings such as cloud services and consumer hardware. And it would be short-sighted to count Google out, though Amazon and Microsoft's businesses are larger. "But with talk of economic pressures on the horizon in the US, noticeable sluggishness in their fourth-quarter performance could warn of more dramatic slowdowns in the digital advertising market, which had been relatively insulated while the ad giant enjoyed strong double-digit growth rates". In the final minutes of trading on Monday, shares hit $1,141.42, a rise of 2 percent in the last 12 months. 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. When shoppers hunt for holiday gifts, they often use Google's search engine, letting the company send them targeted product ads based on those queries.

For starters, analysts believe Google will remain dominant in search. We did more previous year than prior, but they were small.

Another Google segment of wide interest, called "Other Bets", that includes such companies like as health venture Verily and self-driving firm Waymo, rose 18 percent, to $154 million, well short of the $187.4 million analysts were looking for.

Meanwhile, the company's ambitious moonshots factory, referred to in earnings reports as "Other bets", has yet to create a business that makes enough money to truly move the needle for Alphabet. On its earnings call, Google CEO Sundar Pichai said its cloud business was "one of the fastest growing businesses across Alphabet", but that's likely a function of how small it is - if I'm earning a dollar a day and then I start earning two dollars a day, I've increased my earnings by 100 percent. However, those operations showed a $1.3 billion operating loss.

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