Alphabet, parent company of Google, missed market estimates for earnings per share for the third quarter. But the company fared well in the other financial data released by it recently.
The quarterly performance initially brought down Alphabet shares by as much as 4 per cent before recovering to settle down around 2 per cent.
Alphabet reported revenues of $40.5 billion for the quarter against market expectations of $40.32 billion according to Refinitiv consensus estimates.
Alphabet met market expectations for traffic acquisition costs. This is a metric that reflects the payments that are made by Alphabet for search engine to be the default browser on the devices of companies such as Apple. This figure has assumed importance as an indicator of the financial health of the company and is keenly followed by investors and analysts.
“We’ve evolved from a company that helps people find answers to a company that helps you get things done,” Google CEO Sundar Pichai said on a call with analysts.
During the quarter, the revenues from advertising for Google touched $33.92 billion compared ot a figure of $28.95 billion for the same quarter a year ago. The vast majority of Alphabet’s revenues is still accounted for by revenues from advertising. Half of the Search spend of the advertisers now originates from automated bidding. Pichai said.
According to Factset, Google also surpassed market expectations for revenues from its “other revenue” source that include money business generated from sale of hardware like its Pixel phones and cloud products. That figure as reported by Alphabet was at $6.43 billion for the third quarter and beat market estimates of $6.32 billion.
The company also generated $155 million as revenues from its “other bets” – which include business activities by its subsidiaries other than Google such as its self-driving car company Waymo. That figure was more than the $146 million generated by the copany in the same period last year.
“We’ve always stressed that this is a long-term opportunity. We are pleased with the ongoing progress and each quarter we try and give you a sense of the steps along the way,” said Alphabet’s CFO Ruth Porat. “Safety is the most important element when it comes to Waymo, so we are building out the business slowly and in an iterative fashion, and we are pleased about the ongoing progress there.”
The Cloud business was identified by Google CEO Sundar Pichai, in July this year, as the key growth driver for Alphabet and had said that the company has plans to increase the sales force in cloud by three times. He had said that Google’s cloud business churns in revenues of $8 billion annually.
Since Thomas Kurian took over as the CEO of Google’s cloud business, more than a dozen top tier executives from competing cloud companies have been raked into the company to strengthen the business. Currently, rivals and cloud market leaders Amazon and Microsoft are way ahead of Google Cloud as number one and two respectively.
(Adapted from CNBC.com)