Google’s parent company Alphabet has posted profit of $4.2bn on revenue of $20.3bn for the first quarter of the year and second under the new structure, missing analysts’ expectations.
Profit was down 14% on the previous quarter and revenue was down 5%, but compared with the same period a year ago, profit was up 20% and revenue was up 17%.
“Our first quarter results represent a tremendous start to the year, with 17% revenue growth year on year and 23% growth on a constant currency basis,” said Ruth Porat, chief financial officer of Alphabet.
“We’re thoughtfully pursuing big bets and building exciting technologies, in Google and our Other Bets, that position us well for long-term growth.
“The primary driver was the increased use of mobile search by consumers, benefiting from our ongoing efforts to enhance the mobile search experience. We also benefited from solid growth in desktop and tablet search, as well as continued strength in YouTube and programmatic advertising,” she said.
Porat said foreign exchange rates factored heavily into the results, shaving $762m from its revenue for the quarter or $593m after the effects of a currency hedging programme.
But Alphabet’s share price fell around 6% in after-hours trading, as the revenue figure fell short of analysts’ expectations, reports BBC news.
Read more about Alphabet and Google
- In the first quarterly results since switching to the Alphabet structure on 2 October 2015, the company reported a profit of $4.9bn on revenue of $21.3bn.
- Alphabet is a parent company that includes a “slimmed down” Google alongside companies not related to core internet products.
- Alphabet’s quarterly revenue was $15.1bn, above analysts’ average estimate of $15bn, while profit was $7.35 a share, beating predictions of $7.20.
- Google is to pay more UK tax in line with new rules – £130m, said to cover the past 10 years – but denies any wrongdoing in the past.
Stephanie Carr, vice-president for Europe at online advertising firm Marin Software, said while Other Bets are exciting, headline-grabbing innovations, Google remains Alphabet’s bread and butter.
“The latest industry figures show that search has again remained the dominant digital advertising category – a market Google owns 87% of. But recent announcements indicate the company still strives for more.
“To maintain its authority, Google has continued to innovate with features such as shopping campaigns and customer match. To fend off the mounting challenge for ad budgets from Facebook and Twitter, the company has heavily invested in its mobile offering. This tactic continues to pay dividends.”
Google’s advertising revenue increased 16.2% in the first quarter to $18.02bn and the number of paid clicks jumped 29%, but the average price of online ads, known as cost-per-click (CPC), fell 9% in the quarter.
The company previously said YouTube video ad growth has depressed CPCs, and relatively low smartphone search ad prices have also been an issue, according to Seeking Alpha. CPCs fell 12% on Google sites and 8% elsewhere.
However, ad click growth remains strong. Although paid clicks were down 3% from the previous quarter, they were up 29% compared with first quarter of 2015.
Paid clicks rose 38% on Google sites compared with just 2% on other sites, where ad policy changes and competition from Facebook have weighed, said Seeking Alpha.
Google remains the top earner for Alphabet, with revenues rising 17% compared with the previous year to $20.1bn. The Other Bets segment, dominated by Nest/Dropcam, saw revenue rise 108% to $166m, but operating loss grew to $802m, nearly 5 times the revenue.