Alphabet Inc. (NASDAQ:GOOG) missed predictions despite surge in profits

Samuel SharpJan 28, 2017

GOOGL has reported the fourth quarter revenue growth of 22.2 percent to $26.06 billion and diversifying its business beyond advertising.

Analysts expect adjusted EPS of $0.79 per share on revenue of $25.3 billion. Alphabet reported a 22 percent rate in the fourth quarter, up from a 5 percent rate in the same period previous year.

Google faced a 22% tax rate that was higher than the overall year of 19%, which contributed to its hit to profitability. Google did, however, report a 62% increase in non-advertising revenue over the same quarter in 2015. The paid clicks, or clicks on Google ads, grew 36 percent, compared with a 33 percent increase in the third quarter.

Meanwhile, aggregate cost-per-click dropped 15 percent from a year ago and 9 percent from prior quarter. Despite great results in this area, Alphabet's chief financial officer admits that the growth for the quarter was led by mobile search and YouTube.

"The internal transparency we've provided to our business leaders across the Other Bets and Google is helping us to allocate resources more thoughtfully across the opportunities that we see", Porat said during a conference call.

CFO Ruth Porat attributed most of the charge to "equipment", and it came out of cost of revenue: "However, it's important to note the cost of revenues was also affected by approximately $320 million of one-time charges related to equipment and other adjustments which were unrelated to hardware".

(NASDAQ:GOOG)(NASDAQ:GOOGL) released fourth-quarter earnings Thursday after the market closed.

Alphabet stock was down 2% in after-hours trading on the stock market today. Explaining that "this is a core area we've invested in for the long term" and that Google is looking towards a much greater use of voice search than just the home, with Google "thinking about it across phones, homes, TVs, cars".

The problem with these devices is that they lack any sort of screen that could display ads, which presents a huge problem for Google.

For earnings purposes, Alphabet separates operations such as self-driving cars and broadband into its Other Bets category, which almost doubled revenue to $262m in the quarter but still posted a loss of almost $1.1bn.

Many investors (and consumers) have kept a close eye on Google's non-advertising products, which includes its cloud and hardware businesses. Apple, Google, and Microsoft all have their own voice assistant, but the companies focused on mobile devices (smartphones and laptops), while Amazon took over the home.

Google parent company Alphabet Inc.

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