Arjun Panchadar and Paresh Dave
(Reuters) – Alphabet (NASDAQ) Inc. Google has not been able to take advantage of the strong economy that has supported opponents in the first quarter because the leading Internet advertising company has faced growing competition in its search and hardware businesses and has suffered from disruptive changes to YouTube.
Alphabet stocks dropped 7 percent after hours of 1.5 percent to record $ 1.296.20.
Chief Financial Officer Alphabet Ruth Porat told analysts that the company is experimenting with its advertising products because users are dependent on mobile devices and result in revenue instability. Google's Pixel phone sales also faced intense competition in the premium smartphones market, she said.
Major competitors for advertising expenses like Facebook Inc (NASDAQ 🙂 Snap Inc (NYSE :), Amazon.com Inc. (NASDAQ 🙂 and Twitter Inc (NYSE 🙂 All reported quarterly earnings last week over or in line with analysts' expectations.
Alphabet reported that its quarterly sales rose 17 percent over the previous year to $ 36.3 billion, compared to an average Wall Street estimate of $ 37.3 billion, according to Refinitive's IBES.
The 17 percent increase was the slowest in three years and compared to 26 percent in the same quarter of the previous year.
Facebook, Internet advertising company No. 2, posted 26% growth last week to $ 15.1 billion in quarterly results.
The alphabet said that paid clicks fell 9 percent compared to the previous quarter.
Porat also said that slower sales growth reflected foreign exchange effects and strong 2018. Revenues this quarter rose 19 percent in constant currency.
Quarterly costs rose by about 16.5 percent from last year to $ 29.7 billion.
Expenditures grew faster than incomes for most of the past two years in terms of some investors' increased scrutiny of the company's privacy practices and efforts to restrict advertising to potentially offensive content.
However, positive macroeconomic signals gave them reason to believe that the company's advertising was healthy. Shares between their latest earnings announcement and Monday rose 11.9 percent.
Approximately 84.5 percent of revenue, compared to 85.5 percent a year ago, came from Google's advertising store, which sells links, banners, and ads across its own websites and applications and partner applications.
3 billion Google users help to make it the world's largest online ad vendor and, according to EMarketer, record one third of all revenue. Facebook is about 20 percent.
Capital spending of the alphabet fell 36 percent compared to last year to $ 4.6 billion. Growth has eased since the last quarter when it warned the Alphabet in February.
The alphabet said that spending increases are justified, with huge burdens on offices, data centers, and artificial intelligence in line with the expected demand for its services.
However, the company has not yet made a significant profit from spending on businesses such as self-propelled cars and AI Assistant Google Assistant.
Newer revenue-generating units have lagged market share, including Google's consolidated hardware unit and Google Cloud, which sells IT and storage services to businesses.
Google's costs could continue to jump if governments on a global scale continue to grow in danger to reduce the ability of applications to track users for advertising purposes. Other regulators discussed urging companies to increase user content monitoring.
This year, the shares in the alphabet were 23%, which is at least between the so-called FAANG group, Facebook at 48%, Netflix (NASDAQ 🙂 at 39%, Apple (NASDAQ 🙂 at 30% and Amazon at 29%.
Alphabet costs included a $ 1.7 billion fine from the European Commission for placing anti-competitive advertising restrictions on search sites.
Revenue was also strengthened by a change in the valuation of the alphabet in the Ride Sharing app Lyft Inc (NASDAQ :), which held its first public offering a month ago. The alphabet could see similar profits at the end of this year as other high-priced start-ups in which it owns, including Uber Technologies (NYSE 🙂 Inc and Slack Technologies Inc, a software company to publicly debut.
Including a European fine, net profit was $ 6.7 billion, or $ 9.50 per share, compared to an analyst average of $ 7.3 billion, or $ 10.48 per share. Revenues without this fine amounted to $ 8.3 billion, or $ 11.90 per share, which beat analysts' estimates of $ 10.61 per share for adjusted earnings.
The operating margin without penalty was 23 percent, up from 22 percent in the previous period.