Disappointing revenue growth hits Google parent Alphabet shares

Detailing its cloud computing and YouTube revenues for the first time – both of which showed sharp gains – it said profits rose 19 per cent from a year ago in the quarter to nearly $10.7 billion as revenues increased 17 per cent to $46 billion.

Alphabet shares slipped 4.7 percent in after-market trades that followed release of the earnings figures.

The California tech giant, which dominates online search and has developed the Android mobile operating system, has been working to reduce its dependence on the digital advertising which delivers most of its cash.

“Our investments in deep computer science, including artificial intelligence, ambient computing and cloud computing, provide a strong base for continued growth and new opportunities across Alphabet,” said Sundar Pichai, Chief Executive.

Ruth Porat, CFO, told reporters after the earnings release that the company has “consistently expanded disclosure” and “the expansion today we think is the most relevant data”.

The company said its cloud computing services took in $2.6 billion in revenue in the past quarter, up more than 50 per cent, and nearly $9 billion for the year. Still, Google advertising took in the majority of revenue at $38 billion in the quarter, and more than 80 percent of its annual revenues of $162 billion.

Colin Sebastian, an analyst at Baird, said the earnings report showed “a deceleration” in growth for Google, which may have been due to the impact of fewer holiday shopping days.

Despite that, Sebastian said he sees “no change to our positive long-term thesis” for Alphabet.

Analyst Nicole Perrin at eMarketer said the results highlight the significance of YouTube, the popular video service for which Alphabet had not up to now disclosed financial data.

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YouTube has reached 20 million music and premium paid subscribers and over 2 million YouTube TV paid subscribers. It ended 2019 at a $3 billion annual run rate in YouTube subscriptions and other non-advertising revenues.”On the YouTube side, all our user metrics are very strong. They’re global in nature and increasingly we see newer verticals beginning to grow as well. So, YouTube is working horizontally well at scale. And for us, it’s making sure, as an ecosystem, it works better so that the content there, the experiences there are improving,” Pichai told analysts during an earnings call.