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  • Alphabet stock sinks on revenue miss

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    Source: Google
    Google CEO Sundar Pichai at the company’s 2018 Google I/O event in Mountain View, Calif.

    Google-parent company Alphabet just reported its third quarter earnings. The company beat earnings expectations but missed revenue expectations. The stock sunk as much as 5 percent, though it regained some of the losses and hovered around 4 percent down.

    Here are the most important numbers:

    Earnings per share: $13.06 versus $10.42 expected by a Refinitiv consensus estimate
    Revenue: $33.7 billion versus $34.04 billion expected by a Refinitiv consensus estimateAlphabet’s overall revenues were up 21 percent year-over-year.

    As usual, Google’s advertising business accounted for most of its revenue, hitting $28.95 billion in the third quarter, or a 20.3 percent increase year-over-year.

    Meanwhile, its “other revenues” category, which includes its cloud business and hardware sales and is especially important to investors looking for Google’s future beyond ads, hit $4.64 billion, up 29.24 percent year-over-year. That’s a less dramatic acceleration than last quarter’s 36.53 percent increase.

    Alphabet also breaks out the revenues and losses for its longer-term “Other Bets,” like healthcare company Verily, internet service provider Fiber, and self-driving car company Waymo. Other Bets posted Q2 revenue of $146 million, up from $117 million the same quarter last year. Operating losses also grew, with the company posting losses of $727 million up from losses of $650 million the year before.

    Google’s traffic acquisition costs (TAC), which includes the money it pays to phone manufactures, like Apple, to use its services, like search, was $6.58 billion, or 23 percent of its advertising revenues. Wall Street has been watching Google’s rising TAC closely, as it’s been squeezing the company’s advertising margins. That’s the same percentage as Google reported last quarter.

    Alphabet’s operation expenses were $11.1 billion, up 26 percent year-over-year. On the company’s earnings call, chief financial officer Ruth Porat said that that was driven primarily by R&D expenses. The company’s cash capital expenditures were $5.3 billion.

    This story is developing.

    Correction: A previous version of this story misstated the year-over-year percentage change of Google’s “other” revenues category.

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