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Alphabet shares fall after earnings beat estimates but revenues miss mark

Alphabet Inc. (GOOG, GOOGL) topped market estimates on earnings for the third quarter of 2018 but revenues came in a bit shy, causing the stock to drop over 4% during aftermarket hours.

Total revenues grew 21% year-over-year to $33.7 billion but missed the estimate of $34.04 billion. Net income improved to $9.19 billion, or $13.06 per share, from $6.73 billion, or $9.57 per share, in the prior-year period. Analysts expected the company to report earnings of $10.40 per share.

Google's parent Alphabet Q3 2018 Earnings Infographic
Alphabet Q3 2018 Earnings Infographic

The company’s Google segment recorded revenues of $33.5 billion, with Google advertising and other revenues both posting double-digit increases year-over-year. The other category includes cloud and hardware sales and is becoming increasingly important as Google diversifies into other areas beyond search and advertising.

The Other Bets segment, which includes the company’s self-driving car division Waymo, posted revenues of $146 million in the quarter.

Total traffic acquisition costs, which have been putting pressure on ad margins, increased 19.6% to $6.6 billion. Paid clicks on Google properties improved 62% year-over-year while cost-per-click dropped 28%.

Earnings preview: For Google it’s time to look beyond search

Earlier this month, Alphabet unveiled the Pixel 3, Pixel 3 XL, Chromebook tablet and the Google Home Hub at its #MadeByGoogle event. Last week, the company confirmed that it is working on a censored search engine as part of its plan to re-enter China, which is a lucrative market with a large customer base.

Google was recently forced to shut down its Google + services for consumers after it was revealed that a software bug might have compromised the personal data of around 500,000 users. Google’s failure to disclose the event on time did not reflect well on the company.

On Thursday, CNBC reported that in an email sent to employees, Google CEO Sundar Pichai said the company fired 48 people over the last two years for sexual harassment. Of this, 13 were senior executives who did not get an exit package when they were let go.

 

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