Google parent Alphabet on Thursday missed analysts' estimates for third-quarter revenue and rising expenses trimmed its operating margin for the third straight quarter. The tech company's third-quarter results fanned investor concern that big investments in new businesses, increasing regulatory scrutiny and emerging competition have made the company's near-term prospects difficult to predict.
Alphabet shares fell 3.5 per cent to $1,064.22 (€935.98) after hours from their close at $1,103.59. Revenue rose to $33.74 billion (€29.7 billion), but that missed analysts’ average estimate of $34.05 billion, according to Refinitiv data.
Alphabet reported net profit of $9.19 billion compared with $6.73 billion in the same quarter of 2017.
Google has posted strong revenue growth for several years as retailers flock to buy product image ads on Google's search engine and commercials on YouTube. Third-quarter ad revenue was about $29 billion, up 20.3 per cent from a year ago and above the average estimate of $28.762 billion.
Ad revenue
Though ad revenue has fuelled Google for 20 years, the company has committed to providing cloud-computing services and selling hardware over the last few years.
Sales from those businesses combined with revenue from what Alphabet calls “other bets” in healthcare and internet infrastructure were $4.79 billion in the third quarter, 43 per cent above the same period last year, but below analysts’ estimate of $4.94 billion.
Steady revenue growth had helped Alphabet weather an otherwise bruising last few months on the stock market for big technology and communications companies. Rising interest rates have drawn investors away from stocks.
Alphabet gained 5.8 per cent this year entering Thursday and traded at 24 times expected earnings over the next year. Shares of No 2 online ad firm Facebook, which faces questions about flattening usage limiting revenue growth, had fallen 12.5 per cent and were trading at 19 times future earnings.
JPMorgan technology stocks analyst Douglas Anmuth told clients this week that Alphabet looks stronger than other notable tech companies "given its stable and consistent growth, strong profitability and [free cash flow]".
Priming its newer ventures has been costly in terms of marketing and hiring. Costs also have been affected by surges in Google usage on smartphones, where the company splits ad revenue with technology makers such as Apple, and smart speakers, where ads do not appear. Its operating margin fell to 25 per cent from 28 per cent a year ago.
Intel beats estimates
There was better news at chipmaker Intel, where results beat analysts’ estimates for quarterly profit and revenue on Thursday, after three days of grim outlooks from other major chipmakers that have shaken stock markets globally.
Net income rose to $6.40 billion in the third quarter ended September 29th from $4.52 billion a year earlier. Excluding items, the company earned $1.40 per share.
Net revenue rose 18.7 per cent to $19.16 billion. Analysts on average were expecting adjusted earnings of $1.15 per share and revenue of $18.11 billion.
