Alphabet -2.5% despite Q4 beats

Virginia Carson
February 6, 2019

Gross revenue rose 22 percent, or 23 percent before currency shifts, to $39.3 billion. The company's operating margin, a closely watched measure of profitability, was 21 percent, down from 24 percent.

Google Cloud also drove higher expenses, mostly headcount, which rose from the third quarter by nearly 4,400 people, to 98,771.

"With great opportunities ahead, we continue to make focused investments in the talent and infrastructure needed to bring exceptional products and experiences to our users, advertisers and partners around the globe", CFO Ruth Porat said in the earnings release.

Porat said increased operating costs stemmed from licensing content for YouTube, expanded data center operations and Google's hardware business. Alphabet's Q4 earnings also came at a higher cost than expected. Porat said headcount growth should moderate in 2019.

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Investors may see, for the first time, YouTube ad revenues broken out separately.

Google Cloud is a "fast-growing multi-billion dollar business that supports major Global 5000 companies in every important vertical", Pichai said. Revenues from its cloud business, hardware sales and Play, its music and media service, were $6.4bn.

Analysts said Google's core advertising business is starting to plateau, an indication of stiffening competition. High costs and lower margins also didn't help to calm investors, who proceeded to send the company's share price down around 3% in after-hours trading. Earlier, they closed at $1,141.42 in regular NY trading. Revenues in the US rose 20 percent while revenues from Europe, the Middle East and Africa jumped 29 percent due to the stronger euro and British pound. That compared to analyst estimates of $7.69-billion, or $10.87 per share.

The company reported net income of $8.95bn, or $12.77 per Class A and B common share and Class C capital share, in the quarter ended December 31, compared with a loss of $3bn, or $4.35 per share, a year earlier when it recorded a one-time tax charge of $9.9bn. Mobile search advertising revenue is Google's largest driver of growth. And on Amazon, advertisers can see when someone viewing or clicking their ads makes a purchase, something Google can't do since almost all of the sales its drives ultimately happen on other sites. The number of clicks on ads that Google ran on its own services surged 66 percent in the fourth quarter, versus the 2017 holiday period.

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"For a growth company, investment should be applauded", said Atlantic Equities analyst James Cordwell.

We continue to invest in both compute requirements and for office facilities.

The company's ad business is built on the collection of intimate data about billions of people, a practice that's increasingly being scrutinized.

The rise of the Faangs helped propel stock markets to new highs and their stumble helped to drag down indices across the world previous year. Together the two giants account for about 57% of all digital ad spending.

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