Ad Sales Boost Alphabet's 1Q Earnings

Google parent company Alphabet just reported its first quarter earnings, beating analyst expectations on both the top and bottom line. CNBC reports the stock initially popped 3 percent, but seesawed before, during, and after the earnings call.

Although the company saw strong sales growth, its traffic acquisition costs continued to increase as a percentage of revenue and the amount of money it spent on real estate and computing power spiked, too.

Highlights:

• Earnings per share: $9.93 vs $9.28 expected by a Thomson Reuters consensus estimate
• Revenue: $31.15 billion vs $30.29 billion expected by a Thomson Reuters consensus estimate
• Operating income for 2018 came in as $7 billion versus $6.6 billion in 2017

As usual, Google's advertising business accounted for most of its revenue, posting $26.642 billion in the first quarter, up nearly 20 percent year-over-year.

Meanwhile, its "other revenues," which include its cloud business and hardware sales was nearly $4.3 billion. That's up from $3.2 billion year-over-year and includes revenues from smart-home unit Nest for the first time.

Another important measurement of Google's ads business changed this quarter as it started reporting Network properties growth in impressions versus clicks to reflect the way advertisers buy programmatic ads.

Google properties, like search and YouTube, saw paid clicks (how many times people clicked its ads) increase 8 percent quarter-over-quarter while cost-per-click, or how much it can charge for its ads, decreased 7 percent quarter-over-quarter (with a 59 percent increase and a 19 percent decrease year-over-year, respectively). Properties revenues were nearly $22 billion.

Alphabet's operating expenses were $10.7 billion, which was up 27 percent year-over-year. Porat attributed that increase primarily to research and development. Meanwhile, its accrued capital expenditures were $7.7 billion, which is triple the expenditures for the same period in 2017. Porat attributed this huge spike to its $2.4 billion purchase of New York City's Chelsea Market building, as well as investments in data center construction.