Top Story

Alphabet Slips As Revenue Growth Slowest In 4 Years

Alphabet shares were a solid 5% lower in aftermarket trading following the unveiling of Q4 results last night; the first set of results under new Chief Executive Sundar Pichai. The decline slashed $40 billion off the value off the firm whilst removing its membership to the exclusive $1 trillion market cap club.

Sundat Pichai gave investors what they have long been after – a new level of disclosure and transparency. It was unfortunate then that despite the new more transparent approach, the numbers didn’t quite live up to expectations.

Results
  • EPS +20% $15.35 vs $12.60 exp.
  • Revenue +16% $46.07 billion vs $46.94 billion exp.
  • Traffic Acquisition Cost (TAC) $8.5 billion vs 8.5 billion exp.

Slowing Revenue Growth
Revenue growth at Google parent Alphabet slowed by more had expected in Q4. Whilst a moderate slowdown had been on the cards following Q3’s 20.5% revenue growth, Q4’s 16.1% advance in the holiday shopping period was not only disappointing but also the slowest level of growth in 4 years.

source cnbc

The slowdown was almost entirely caused by weak non-advertising revenue, a side of the business which accounts for around 20% of the group total. Growth from these divisions which include cloud computing, hardware and the Play app was just 22%, well down from 39% in Q3. 

Losses from its moonshot projects, such as the driverless car, drone delivery and drug discovery units increased by 50% to a staggering $2 billion, raising a few eyebrows.

YouTube transparency backfires
As part of the increased transparency, YouTube ad revenue was $15 billion, up 36% whilst accounting for 14% of total advertising from Google’s properties. These figures highlight the importance of the video network. However, this was expected to have been closer to 20% meaning YouTube is smaller than generally assumed.

Google cloud computing
Cloud computing division reported results separately for the first time, revealing that revenue grew 53% to $2.6 billion in the last quarter. Most of the revenue coming from its G-Suite of online applications. However, compared to Microsoft Azure’s 62% growth in most recent quarter, Google’s cloud division’s growth rate looks mediocre.


Disclaimer: GAIN Capital UK Limited (trading as "Forex.com") is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, Forex.com does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by Forex.com or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although Forex.com is not specifically prevented from dealing before providing this material, Forex.com does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.