Published: Wed, February 06, 2019
Business | By Pearl Harrison

Alphabet profit margins slide due to rising Google costs

Alphabet profit margins slide due to rising Google costs

Figures for the company year-over-year are up nearly across the board, with the notable exception of Google's traffic acquisition costs (TAC) and operating losses for Google's "Other bets" category.

Facebook Inc. showed that last week by reporting a 30 percent jump in fourth-quarter revenue from a year earlier.

Ruth Porat, CFO of Alphabet and Google did not provide any guidance for 2019 and simply said that the company will “continue to make focused investments in the talent and infrastructure needed to bring exceptional products and experiences to users, advertisers, and partners around the globe.”.

Other key metrics: Operating income, $8.2B (consensus: $8.61B); Operating margin, 21% (consensus: 22.1%).

Google parent company Alphabet has posted its fourth quarter 2018 and full fiscal year earnings, noting continued growth for the company and beating out many analysts' estimates.

The Google name is displayed outside the company's office in London, Britain.

Google is aware of this, which is why its earnings report includes a section titled "Other Bets", describing efforts like self-driving-car company Waymo, its health company Verily, and the high-speed internet provider Google Fiber. Thanks chiefly to its search ads as well ads on its YouTube video service, Google has 31.3 percent of the worldwide market to Facebook's 20.5 percent, according to eMarketer.

Money spent on Google hardware, such as Pixel smartphones or Nest smart home devices, was also a factor along with investments in datacenters essential to Google's growing cloud computing business. "We are confident that Google will continue to have rising paid click volumes for the foreseeable future". The cloud unit's G Suite productivity product now has 5 million customers, he said, up from 4 million in last year's first quarter.

Google doesn't report its cloud revenues, itself an indication that it continues to trail far behind market leader Amazon Web Services Inc. and Microsoft Corp.

Chief Executive Sundar Pichai said during the earnings call that Google remains on track to begin opening its new New York City campus in 2020.

Some investors remain frustrated that Alphabet isn't more aggressive in repurchasing its stock, given its earnings power and cash balance.

Alphabet's unaudited assets at the end of December 31st, 2018 totalled $232.79 billion United States dollars (roughly $305.39 billion CAD), an increase from Q4 2017's $197.30 billion USD (roughly $258.83 billion CAD). Without those changes, net income for Q4 of 2017 would have been $6.8 billion.

"Acquisitions are an attractive complement to what we do to drive organic growth", Porat said on Monday.

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