Google falls short on third-quarter profit

SAN FRANCISCO (AP) – Google parent company Alphabet reported mixed third-quarter results on Monday, beating analyst expectations for revenue but falling short on profits. The stock fell more than two per cent in after-hours trading.

Still, the company met growth expectations for its key moneymaking businesses — notably its advertising business, which reported revenues that increased 17 per cent to USD33.9 billion during the quarter.

But Alphabet’s capital expenditures grew at the same time, rising to USD6.7 billion in the period as Google continued to expand its headquarters and build data centres for its cloud computing business.

Alphabet makes the majority of its money from selling targetted advertising across the web, apps and Google products including its search engine and video streaming site YouTube. Investors are now also closely watching the growth of Google’s cloud business.

“I am extremely pleased with the progress we made across the board in the third quarter, from our recent advancements in search and quantum computing to our strong revenue growth driven by mobile search, YouTube and Cloud,” Google CEO Sundar Pichai said in a statement.

Google does not break out its quarterly cloud-computing revenues, but lumps them into an “other revenues” category with products such as hardware and Google app store purchases. Revenues for that category grew to USD6.4 billion from USD4.6 billion last year.

Google unveiled a new version of its Pixel phone and a laundry list of other products at a hardware event earlier this month, emphasising the Google services on the devices. These help Google learn more information about customers, eventually feeding its advertising business. Sales from the hardware products have not to take off as a big cash cow for the company.

Ruth Porat, the company’s chief financial officer, noted that the quarter was “unusually” active for hiring as Google brought on nearly 6,500 employees during the period. While that number covers companywide hires, Google has made it clear that hiring engineers and especially sales workers for its cloud business is a priority.

The company’s cloud business is undeniably growing, although it still trails well behind competitors Amazon and Microsoft.

Overall, Alphabet reported a profit of USD7.1 billion, or USD10.12 per share — significantly below the USD8.7 billion expected by analysts polled by FactSet.

Quarterly revenue rose 20 per cent to USD40.5 billion — slightly above the USD40.3 billion expected by Wall Street. Total expenses grew faster, though, rising almost 25 per cent to USD31.3 billion.

Alphabet’s Other Bets division, which includes long-term aspirational projects such as self-driving car company Waymo and drone delivery company Wing, reported increased revenue of USD155 million but a growing loss of USD941 million.