Google sales

Alphabet shares tumble after earnings show disappointing Google sales growth

Alphabet Inc.’s revenue growth slowed in early 2019, according to a Monday afternoon earnings report that sent stocks tumbling after-hours.

Google’s parent company fell short of expectations as all of its major sales categories performed slightly below expectations in the first quarter, and another big fine outside of Europe sapped the company’s profits . GOOGL Alphabet,
-0.72%

GOOG,
-0.58%
reported first quarter profit of $ 6.66 billion, or $ 9.50 per share, on revenue of $ 29.48 billion, after removing traffic acquisition costs; At the same time a year ago, Alphabet was posting a profit of $ 13.33 per share on ex-TAC ​​sales of $ 24.86 billion a year ago.

Alphabet’s profits would have been $ 11.90 per share without a $ 1.7 billion fine outside of Europe for its online advertising practices. Analysts on average expected ex-TAC ​​revenue of $ 30.04 billion and earnings of $ 10.60 per share, according to FactSet, and largely ignored the fine in their estimates.

Revenue grew at a rate of less than 20% – sales increased 16.7%, 18.6% taking into account the APR – a level Alphabet has managed to maintain over the past three years. In 2018, Alphabet sales grew 23.4% with no quarter showing year-over-year growth below 20%.

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In Monday’s conference call, executives blamed much of the blame on exchange rates and said they had no intention of slowing down free spending plans even as these effects continue. Shares fell further, from a 5% decline to a 7% decline, after Alphabet provided what passes for a company’s forecast, which is essentially a bit of chatter about spending plans.

“Based on the continued strengthening of the US dollar against key currencies, we expect to continue to see headwinds on our revenue and operating profit in the second quarter,” CFO Ruth Porat said at the conference phone call Monday, before saying that plans to spend on new infrastructure and increasing the workforce were not changing.

Alphabet divides its business into three main areas: Google Advertising, Google Other Income, and “Other Bets”, which are non-Google activities. Advertising is the most important activity, bringing in most of the income. In the first quarter, sales in this category totaled $ 30.72 billion excluding the APR, which is below analysts’ expectations of $ 31.48 billion. The company reported advertising revenue of $ 27.23 billion from a year ago, pushing this company’s sales growth rate to 15.3%, a deceleration from the rate of around 20% in the fourth quarter. .

Google’s other companies – Play Store, Hardware, and Google Cloud – reported revenue of $ 5.45 billion, missing expectations of $ 5.67 billion, while Other Bets reported revenue of $ 170 million against expectations of $ 172 million. Other Bets also reported an operating loss of $ 868 million, a jump from $ 571 million a year ago and significantly worse than the average analyst estimate of $ 640 million.

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Executives suggested that the disappointing sales of Google’s Pixel smartphone were the big factor for Google’s other revenue.

“The hardware results reflect a decline in Pixel sales year over year, in part reflecting significant promotional activity across the industry given some of the recent pressures in the premium smartphone market.” Porat said on Monday.

Although Alphabet’s venture capital investment activity is not detailed in the financial information, it does have a significant impact on earnings. Gains on investments added more than $ 4 billion in profit in 2018 and 2019 started off similarly, with Google reporting $ 1.08 billion in earnings on equity securities. This is largely believed to be due to the increase in the value of Lyft Inc. LYFT shares,
-0.93%
, which was released to the public earlier this year.

Alphabet’s Class A shares closed on Monday with a gain of 1.5% to $ 1,296.20, bringing its market cap to nearly $ 900 billion, then fell below $ 1,200 in the aftermath. Stock Exchange. The title was down 7.6% before the stock market on Tuesday.

The stock has gained 27% in the past year, as has the S&P 500 SPX index,
+ 0.03%
increased by 11%.