Alphabet Misses Forecasts

Google parent Alphabet Inc missed quarterly profit forecasts as steady ad sales growth was offset by increased spending to promote its consumer gadgets, YouTube video app and cloud computing services, the U.S. technology company said on Thursday.

According to Reuters, though growing demand for pricey ads on mobile apps has kept Google’s core ad business surging, the company has moved aggressively to maintain dominance and diversify sales. Expenses jumped 27 percent to $24.7 billion in the fourth quarter from the year-earlier period.

Google bought ads during major sports events to market its new Pixel 2 smartphone and YouTube television service. It slashed prices on other hardware in the race to get online search and media streaming devices into people’s homes. Google continued to quickly add staff to its enterprise sales unit.

A growing portion of revenue has been spent on having the Google search engine set as the default option on products and services such as Apple Inc’s iPhone and Mozilla’s Firefox browser.

Ruth Porat

Alphabet Chief Financial Officer Ruth Porat told analysts in a post-earnings conference call that higher marketing costs coincided with holidays and that payments to partners such as Apple and Mozilla would steady in coming quarters.

Investments are paying off, Google Chief Executive Sundar Pichai said, noting that cloud computing is generating $1 billion in quarterly sales. He said Google’s G Suite workplace software package had doubled its customers to 4 million in two years, as Reuters first reported earlier on Thursday.

“Overall, it was a good quarter. Advertising revenue is still up significantly,” Ivan Feinseth of Tigress Financial Partners said in an email.

Fourth-quarter sales increased 24 percent to $32.3 billion, above the average analysts’ estimate of $31.9 billion, according to Thomson Reuters I/B/E/S. Adjusted quarterly profit of $6.8 billion, or $9.70 per share, missed estimates of $7 billion, or $10 per share.

The profit figure excludes a $9.9 billion tax charge as Alphabet joined much of corporate America in reporting large one-time expenses in the fourth quarter due to U.S. legislation enacted in December that lowers corporate rates.

The tax law has given companies more affordable access to overseas profits, and Porat said Alphabet would make a “modest increase” in share buybacks with an additional allocation of $8.6 billion.