Published: Tue, February 05, 2019
Money | By Ralph Mccoy

Alphabet beats Wall St. estimates, but spending worries investors

Alphabet beats Wall St. estimates, but spending worries investors

"ORCOM00093-topic.html" class="local_link" > Alphabet beat Wall Street expectations for its fourth quarter earnings Monday, although its stock slid in after-hours trading over investor concerns about increased spending.

Facebook Inc. showed that last week by reporting a 30 percent jump in fourth-quarter revenue from a year earlier.

Analysts on average had expected revenue of $38.93 billion and earnings of $10.87 per share, according to IBES data from Refinitiv.

As usual, the vast majority of Google's income came from its ad business, but its "other revenues" category continues to grow in a major way.

On a per-share basis, the Mountain View, California-based company said it had profit of $12.77. This represented a growth of 20 percent, which was the same rate of growth for Q4 2017 compared to Q4 2016. Ad revenue on the video platform rose 11% year over year in the third quarter, and just over half of advertisers have renewed their spending on YouTube. For the full year, analysts are looking for EPS of $41.81 and revenues of $136.49 billion, the vast majority of which is ad revenue from Google search and YouTube. At the time, Dave Vellante, chief analyst at research firm Wikibon and co-CEO of SiliconANGLE Media Inc., said Kurian brings "the ability to prioritize, focus resources and move fast when things change".

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That means Google places many more commercial messages in more places, people are surfing Google hangouts more, and the ads are generating results for the companies that buy them. Capital expenditures rose to $25 billion in 2018, mostly to keep up with Microsoft and Amazon. For the latter, much of the cost jump over the year was from fiber cable rollouts - Google has an very bad lot of private fiber - while the ad giant also invested in, among other things, data centers and the hiring of more sales and research workers.

Other businesses, such as health venture Verily and self-driving start-up Waymo, were more disappointing at $154 million in revenue.

But Alphabet did not provide specifics on the numbers of those big contracts, or total Google Cloud revenue compared with previous years.

For all that, investors apparently expected a little more operating income, which at $8.2 billion came in a bit short of the $8.6 billion consensus.

How well Google fares with investors will depend on how aggressively the tech giant tackles cloud computing services in the next year, either organically or through acquisitions. "We also ended the year with another milestone passing 5 million paying customers for our Cloud collaboration and productivity solution G Suite". It's also seeing an "uptick" in $100 million contracts, Porat said.

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