Google parent Alphabet reported first-quarter results on Monday. The stock was down 8 percent on Tuesday, extending a similar decline in trading after markets closed on Monday, and lopping more than $60 billion off its market value.
The tech giant said Google's online advertising revenue rose 15 percent to $30.72 billion, marking its slowest rate of growth in the last three years and falling short of Wall Street's expectations. The sluggish growth is a direct result of declining ad sales as Google faces competition from other quarters, namely Facebook and Amazon. In these areas, Google will be competing with Microsoft and Amazon, and the company is expected to continue to invest in capital expenditure, but at a slower rate than in 2018, according to Porat, in an attempt to catch up. He also promised to continue working on user privacy concerns.
In terms of mobile ads this year, Google's bounty should hit 35.4 per cent of the $231.12bn global total.
"Nearly half of ad budgets in the USA are still spent offline, 90 percent of commerce in the U.S.is offline, and we are focused on digital playing a big role in that", Porat said.
"I think we are building a strong business across all our verticals, and we're definitely are seeing a strong momentum and look forward to being able to share more at the appropriate time", Pichai said.
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"This ad sales deceleration was a shocker to the Street that had high hopes coming into earnings", Wedbush Securities analyst Dan Ives told The Post. The company doesn't break out YouTube and cloud revenue, but the two are important sources of future growth.
The one indication of cloud revenue comes from Google's "other revenues" segments, which is mostly cloud but also includes Google Play apps, smartphones and smart speakers. Alphabet and Google chief financial officer Ruth Porat attributed this to industry-wide promotional activities in response to pressure on high-end phone sales.
Operating margin, a closely watched profit metric, was 23 percent, excluding the antitrust fine. The fine was imposed in March for anti-competitive practices in Google's advertising business, referring to a specific exclusivity practice Google now says it has ended. It's the third such fine the company has to pay to European regulators. When factoring in the fine, Alphabet Q1 earnings came to $9.50 per diluted share on revenue of $36.34 billion, up 17%.
Q1 EPS (GAAP): $US9.50 (including a $US1.7 billion European Union fine), compared with $US10.10 expected by analysts.
Revenue was up year-over-year in Alphabet's "moonshot" Other Bets category, which includes Waymo, Fiber, Verily, and Alphabet's other healthcare-driven initiatives. Losses grew to $868 million from $571 million a year ago.