Alphabet beats on earnings and revenue, but stock drops after hours

  • Traffic acquisition costs as a percent of advertising revenue came in at 23 percent, matching analyst estimates and falling right in line with previous quarters.
  • Meanwhile, Google continues to grow its “other revenues” segment, which includes its cloud business and hardware sales.
  • Alphabet’s “Other Bets” category, which houses Alphabet’s other companies, like health venture Verily and self-driving start-up Waymo, came in shy of revenue estimates.

Alphabet reported fourth-quarter results Monday that beat expectations across the board. Still, the stock fell 3 percent in extended trading.  Here’s how the company did compared with Wall Street estimates:

  • Earnings: $12.77 per share vs. $10.82 according to Refinitiv consensus estimates
  • Revenue: $39.28 billion vs. $38.93 billion according to Refinitiv consensus estimates
  • Traffic acquisition costs: $7.44 billion vs. $7.62 billion according to StreetAccount

Advertising revenue grew 20 percent from last year’s fourth quarter, to $32.6 billion, the same rate of growth as last quarter.

Traffic acquisition costs — the fees Google pays to companies like Apple to be the default search engine — rang in at $7.44 billion, up 13 percent from $6.58 billion during the third quarter of this year and up 15 percent from $6.45 billion during the year-ago quarter.

TAC as a percent of advertising revenue came in at 23 percent, matching analyst estimates and falling right in line with previous quarters.

Cost per click on Google properties — which measures the amount Alphabet charges advertisers — dropped 29 percent from last year and 9 percent from last quarter.

Alphabet-owned Google is facing new pressure in digital advertising from Amazon’s rising presence in the market, at the same time its costs of doing business are rising.

Alphabet reported capital expenditures just north of $7 billion for the period, posting a much more expensive quarter than the $5.63 billion in capex that was projected.

The company reported an operating margin of 21 percent, lower than the 22 percent margin that was expected and the 23 percent margin it reported this time last year.

Growth segments

Google continues to grow its “other revenues” segment, which includes its cloud business and hardware sales. The division accounted for $6.49 billion during the quarter, narrowly beating Wall Street estimates of $6.43 billion.

That marks a 31 percent increase year over year.

Alphabet’s “Other Bets” category, which houses Alphabet’s other companies, like health venture Verily and self-driving start-up Waymo, came in shy of revenue estimates at $154 million in revenue. Wall Street had been looking for $187.4 million, according to StreetAccount.

Still, the segment posted an 18 percent year-over-year increase.

Alphabet is now just 2,000 employees of 100,000-person headcount, up from 80,000 employees at the same time last year.


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