Alphabet Q1 results: Revenue falls short of expectations as EU fine takes toll

Google’s parent company Alphabet posted first-quarter results that fell short of expectations, but areas such as cloud were a highlight over the period driven by strong consumer demand for hosting and analytics products.

The company posted total revenues of $36.3bn, down from the $37.3bn that analysts forecast, but with a 17% increase on the same period last year when it reported $31.5bn sales.

According to the firm, results were driven by mobile search, along with “important contributions” from YouTube, followed by cloud offerings.

The major dampener on Alphabet’s numbers is the $1.7bn fine paid to the European Commission on Google’s behalf for deals with its search partners that were found to have breached European competition regulations.

This is the third billion-dollar fine paid by the company to the EU in the past three years, with the amount spent on fines so far totalling $9.4bn.

However, when it comes to cloud in particular, things appear to be looking up. Though partially offset by weak hardware sales, other revenues for Google totalled $5.4bn, up 25% year over year, fuelled by areas such as cloud computing.

Excluding the impact of the EU fine, the biggest increase in Alphabet’s operating expenses was in reseach and development, with headcount growth in cloud as the largest driver.

According to Alphabet, Google Cloud Platform remains one of its fastest growing businesses, with “strong customer momentum” around demand its computing and data analytics products.

During a call with investors on Monday 29 April, Alphabet’s chief executive Sundar Pichai commented on the cloud business, saying new chief Thomas Kurian “has really hit the ground running”.

Pichai alluded to announcements made at Google Cloud Next earlier in April, which included partnerships with companies such as MongoDB and Elastic for its new cloud service platform, Anthos.

The Alphabet chief stressed that the company is committed to becoming “the most customer-centric cloud provider for enterprise customers” and making it easier for companies to do business with Google, with new contracting and pricing structures.

Pichai claimed that nine of the world’s 10 largest media companies, seven of the 10 largest retailers and more than half of the 10 largest companies in manufacturing, financial services, communications and software all use Google Cloud.

The company is expanding its cloud regions to support customer demand, Pichai added, with the addition of two new regions in Seoul and Salt Lake City, due to be launched in 2020, building on the firm’s current global footprint of 19 cloud regions and 58 datacentres.

Reducing environmental impact was also one of the areas highlighted by Pichai during the investor call. He pointed out that a Google datacentre uses 50% less energy than a typical datacentre, while providing seven times more computing power than what was delivered five years ago.