Google-parent company Alphabet reported its third quarter earnings on Thursday. The company beat bottom line projections but whiffed on revenue expectations and the stock sunk as much as 5.3 percent in after-hours trading.
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 estimate
Although Alphabet’s overall revenues were up 21 percent year-over-year, chief financial officer Ruth Porat said on the company’s earnings call that revenues were affected by the the strong U.S. dollar.
As usual, Google’s advertising business accounted for most of its revenue (85.8 percent, to be exact), 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.
CEO Sundar Pichai said on the earnings call that its cloud business has had “many important wins” recently, but he didn’t provide any new revenue numbers to build on the $1 billion in revenue per quarter he announced in Q4. Overall, Google cloud’s market share is seen to be a distant third behind Amazon and Microsoft’s. Pichai also said that he thinks companies will want a “multi-cloud” environment, and that the space isn’t a “zero-sum game.”
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. The Other Bets category posted Q3 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. On the company’s earnings call, chief financial officer Ruth Porat said that the revenues were primarily generated by Fiber and Verily.
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, and Q3’s TAC as a percentage of ad revenue was in-line with the previous quarter.
Spending continued to increase. The company’s accrued capital expenditures were $5.6 billion, which Porat attributed largely to data center construction projects and machines to increase its own compute.
Alphabet’s operating expenses were $11.1 billion, up 26 percent year-over-year, primarily driven by R&D expenses.
Correction: A previous version of this story misstated the year-over-year percentage change of Google’s “other” revenues category.
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