Alphabet third-quarter profit misses estimates

Google acknowledged investigations into its competitive practices

A woman walks below a Google sign on the campus in Mountain View, California, Alphabet Inc, parent company of Google reports financial earns on Monday, Oct. 28. AP Photo/Jeff Chiu

Google parent Alphabet missed analysts’ estimates for quarterly profit on Monday as it reported its highest quarterly expenses.

The result sent shares down about 1.7 per cent even though revenue growth topped expectations.

Google provides limited product-level financial disclosures, leaving investors increasingly uncertain about how regulatory scrutiny, advertiser boycotts and global trade tension are affecting operations.

Alphabet shares have underperformed against some peers, rising 17 per cent in the past 12 months compared with a 33 per cent gain for Microsoft and 29 per cent for Facebook.

Alphabet shares fell 1.7 per cent in after-hours trade to $1,267.60.

Google has tried to demonstrate that its cloud-computing business is doing remarkably well.

It disclosed about $2 billion in revenue last quarter and said it planned to hire thousands for that unit to encourage growth.

It also has tried to reassure investors that there is no weakness in its YouTube video unit, while expressing confidence in its business overall through share buybacks.

But cash continues to be spent on other businesses such as hardware and dealing with the clashes with regulators.

Total expenses were $31.3bn, about 25 per cent higher than a year ago and topping the previous high of $31.1bn in the fourth quarter of 2018.

Google in the third quarter acknowledged investigations by the US Congress, Department of Justice and 48 states into its competitive practices. It also settled a privacy investigation by the Federal Trade Commission.

Google was given an extra 90-day reprieve from an export ban that would restrict its relationship with Chinese smartphone maker Huawei, one of its top partners in distributing mobile apps.

Google has said it is co-operating with the increased scrutiny and that it has survived calls for increased regulation many times.

Alphabet, which generates about 85 per cent of its revenue from sales of advertising space and ad technology, reported total third-quarter revenue of $40.5bn.

That was up 20 per cent over last year and compared with 19 per cent growth in the second quarter.

Analysts on average estimated 19.52 per cent growth and $40.32bn in revenue, according to data from Refinitiv.

Net income for the third quarter rose to $7.1bn, or $10.12 a share, compared with analysts’ estimates of $8.811bn, or $12.44 a share.

The operating margin was 23 per cent, down from 24 per cent in the second quarter.

Shares of Google closed 1.95 per cent higher in regular trade on Monday.

The shares earlier had risen about 2 per cent after Reuters reported Google had made an offer to acquire US wearable device maker Fitbit.