GOOGLE PROFITS SLIP: Tough Day for Alphabet. “..shares fell in after-hours trading Monday as investors zeroed in on shrinking margins and slower revenue growth overall” By Todd Horwitz, Bubba Trading.

 

Google’s parent company posted a big jump in quarterly revenue but also ever-rising costs outside its core online-advertising business, showing the drag from its efforts to diversify. Despite monster results in internet search, Alphabet Inc. shares fell in after-hours trading Monday as investors zeroed in on shrinking margins and slower revenue growth overall.

Alphabet charges advertisers for each ad served on its web sites — dropped 29 percent from last year and 9 percent from last quarter, which might be alarming investors concerned that Google’s pricing power for ads is eroding. Alphabet-owned Google is facing new pressure in digital advertising from Amazon’s rising presence in the market and seeing heightened pricing pressure, 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.

Ramped-up spending on those ancillary businesses in the fourth quarter helped push margins down to 21%, from 24% in the year-earlier period. Alphabet’s per-share earnings came in at $12.77 for the latest quarter, beating Wall Street expectations, on total profit of almost $9 billion. Revenue of $39.28 billion for the quarter and $136.82 billion for the full year represented a big jump from $32.3 billion and $110 billion, respectfully, a year earlier.

The latest quarter also brought a record research and development bill: $6 billion, up 40%. Alphabet’s report closes on a mixed bag of year-end results for Silicon Valley’s tech giants, with international factors among the largest variables. Apple Inc.’s revenue and profit declined in part due to weakness in China, while Amazon.com Inc. warned that government restrictions in India could pinch its revenue there.

Unlike competitors flayed in recent months for high-profile privacy violations, Alphabet has mostly stayed out of the headlines. The company has kept attention on its financial story, and the earnings offered mixed results on that front. Overall revenue growth of 22% came in around the rate that analysts have come to expect, though lower than in 2017’s final period.

Todd “Bubba” Horwitz

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Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.