Published: Tue, February 05, 2019
Business | By Eloise Houston

Google Stock Falls on a Lower Fourth-Quarter Profit Margin

Google Stock Falls on a Lower Fourth-Quarter Profit Margin

Google parent Alphabet beat Wall Street earnings expectations across the board Monday, but higher spending on costlier businesses like YouTube and cloud services spooked investors.

Alphabet's Other Bets business, which includes its self-driving vehicle company Waymo and health-tech venture Verily, saw revenue rise to $154 million, up from $131 million in the year-ago period.

Overall, Alphabet revenue was $136.8 billion for 2018, up 23% year-over-year, with $39.3 billion quarterly revenue, up 22%, the company said. Alphabet said its traffic and acquisition cost - the money it pays to companies to run its ads and services - was $7.4 billion during the quarter, up from $6.5 billion a year ago.

"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.

Revenues increased 22 percent year-over-year and operating margin of 21 percent, but Alphabet's share price dropped 3.3% at one point.

Google's paid-click growth slightly rose to more than 66% year-over-year, while the cost per click (CPC) declined 29%, slightly more than the third quarter of 2018.

While Alphabet had a mostly positive earnings report, there were misses for the tech company. The corporation reported $7 billion in expenditures, more than the projected $5.63 billion. YouTube numbers are buried inside Google, while cloud and hardware results are part of Google's Other revenues line. For the latter, much of the cost jump over the year was from fiber cable rollouts - Google has an terrible lot of private fiber - while the ad giant also invested in, among other things, data centers and the hiring of more sales and research workers.

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

Cooling towers sit atop a Google data center in The Dalles, Ore., as expansion continues.

Late past year, Google brought in former Oracle Corp. executive Thomas Kurian to lead its cloud business into what it hopes to be a rapid growth stage.

In the final three months of 2018, Google's CEO was grilled by Congress about data privacy, its employees around the world walked out over sexual harassment scandals, and it disclosed a security bug impacting its largely forgotten social network, Google Plus. "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. Among the more damaging of those was its work on a China-specific search engine which ultimately caused questions to be raised by the USA government.

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