Google parent Alphabet hit by rising costs

Alphabet is the latest of the big tech firms to report earnings for the final three months of the year.  — Reuters pic
Alphabet is the latest of the big tech firms to report earnings for the final three months of the year. — Reuters pic

SAN FRANCISCO, Feb 5 — Google parent Alphabet reported quarterly earnings beating Wall Street expectations yesterday, but shares slipped, with investors apparently focused on rising costs at the technology giant.

Alphabet reported a profit of US$8.9 billion (RM36.37 billion) in the fourth quarter on revenue that was up 22 per cent to US$39.3 billion from the same period a year earlier.

“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,” said Alphabet chief financial officer Ruth Porat.

Alphabet shares were down 3.2 per cent to US$1,104.51 in after-market trades that followed release of the earnings figures from the final three months of last year.

Expenses rose to US$31 billion compared with US$24.6 billion in the same period a year ago.

Another factor making the market wary was a 29 per cent drop in “cost per click” or the average price of digital ads, the main source of revenue for the tech giant.

The report offered no detailed breakdown of income but Google took in the overwhelming majority of revenue in the quarter, US$39.1 billion, with US$32.6 billion from advertising.

Losing ‘other bets’

The company’s “other bets,” including its autonomous driving division Waymo and its life sciences and cybersecurity units, took in US$154 million in revenue. However, those operations showed a US$1.3 billion operating loss.

Industry tracker eMarketer forecast that Alphabet’s money-making engine Google would take in US$102.43 billion in digital ad revenue this year, commanding 31.3 per cent of the global market.

Alphabet’s head count grew to nearly 99,000 from 80,000 employees during the course of the year as expenses at the internet colossus climbed.

Alphabet is the latest of the big tech firms to report earnings for the final three months of the year.

Google remains a dominant player in online advertising even as Alphabet has ventured into “moonshots” in new sectors.

But Google is a key target of “techlash,” with probes in Europe on monopoly abuse in search and advertising on its Android mobile ecosystem, and could be impacted by proposed privacy rules in the United States.

Last week, Amazon reported a record profit of US$3 billion on strong holiday sales, while Microsoft saw an US$8.4 billion profit.

Facebook’s profit jumped to US$6.9 billion as ad revenues kep growing and Apple reported a US$20 billion profit, despite lower iPhone sales.

The results come after a roller-coaster period with drops of more than 20 per cent in the value or Apple and Amazon, which have lost their trillion-dollar status, and with Facebook and Google seeing increased pressure to deal with concerns on privacy and data protection. — AFP