Alphabet beats Wall St. estimates, but spending worries investors

Gladys Abbott
February 5, 2019

Alphabet, the parent company of Google, has just released its quarterly and yearly financial results.

Google "other" revenues - think cloud platform and other non-advertising dosh - were $6.5bn, up 30 per cent from $5bn.

Alphabet's cash and other short-term holdings totaled $109.14 billion at the end of 2018. Alphabet's shares had risen 2 percent, to $1,141.42, in regular trading, putting them up about 8 percent on the year so far. Growth in headcount will "moderate significantly" as well.

Alphabet has been viewed as a harbinger for the overall stock market, so the results may have an outsized impact when the market opens Tuesday.

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.

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One stunning number is telling about Google's effectiveness as a business.

But the company's profitability continued to fall in the quarter.

Cloud engineers and sales professionals also made up the bulk of the 4,000 employees it hired during the quarter, Porat said. Google announced in November that unit CEO Diane Greene was leaving after three years at the helm, and in January she was replaced by former longtime Oracle Corp. executive Thomas Kurian. Earnings per share were $12.77, easily surpassing a $10.86 estimate. 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. So Google is responsible for 109 percent of Alphabet's profits and 69 percent of its revenues. Pichai declined to elaborate today except to say that Google aims to get the "right fit" for any acquisition.

Google's mostly free search, video and productivity tools are used by billions of people across the world, despite a backlash in some countries over how the company uses and protects customer information.

Amazon and Alphabet are increasingly competing for advertising dollars and in cloud computing. In particular, Amazon has been aggressively expanding its ad business, which is small but growing quickly. YouTube's share of Google's net ad revenue worldwide remains at 11%. That was the same growth rate as reported for last year's fourth quarter, which worries some analysts. "Other Bets" revenues, primarily derived from Fiber and Verily life sciences, was $154 million for the quarter, up from $131 million a year ago, with a loss of $1.32 billion, up from a loss of $748 million a year earlier. A year ago, the company's operating margin was 29.6%, according to FactSet.

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