Business and Economy
Google stock drops amid slowing ad revenue growth
Google’s advertising revenue, its key moneymaker, grew by 15 per cent to .
7 billion — slower than investors had hoped. Google’s digital-ad rivals include Facebook and Amazon, the latter of which has been steadily gaining ground. (Photo: Sundry Photography / Shutterstock.com)
SAN FRANCISCO — Google parent Alphabet beat analyst earnings expectations but reported slowing revenue growth amid tougher competition in the online advertising market. Alphabet shares dropped more than 7% in after-hours trading.
Google’s advertising revenue, its key moneymaker, grew by 15 per cent to $30.7 billion — slower than investors had hoped. Google’s digital-ad rivals include Facebook and Amazon, the latter of which has been steadily gaining ground.
The results sparked concerns that Google’s enormously profitable advertising machine might be starting to sputter. Some analysts suggested it’s a signal that Google might need to diversify its business more quickly.
“Does this put more pressure on Google to make more aggressive bets on cloud?” asked Wedbush Securities analyst Dan Ives.
Google executives highlighted the company’s cloud-computing business as one of its fastest growing segments during a call with analysts Monday. But the cloud currently accounts for only a small slice of overall revenue. Google reported $5.4 billion in “other” revenue, which includes cloud, hardware and Play store purchases.
Alphabet reported a first-quarter profit of $8.3 billion, down 6% from $8.9 billion in the year-earlier period. Profit amounted to $11.90 per share, well above Wall Street estimates of $10.60.
That figure doesn’t include an expected charge of $1.7 billion to account for a European Union antitrust fine. The fine was imposed in March for anti-competitive practices in Google’s advertising business, referring to a specific exclusivity practice Google now says it has ended.
Including the fine, Alphabet’s profit of $6.7 billion fell short of analyst estimates.
Excluding advertising commissions that Google pays to customers, Alphabet’s overall revenue was $29.5 billion — also falling short of the $30 billion analysts were expecting.
Alphabet also reported widening losses in its “Other Bets” category — a broad segment that includes experimental ventures such as self-driving car business Waymo and internet-balloon subsidiary Loon. Losses grew to 8 million from 1 million a year ago.
Alphabet once again expanded its workforce, growing to 103,459 employees — adding nearly 4,700 workers in the last three months.
