Alphabet Inc's fourth-quarter revenue and profit beat Wall Street's expectations on Monday but sharply higher spending, as it added data centres, cloud engineers and marketed its services heavily during the holidays, anxious investors.
Alphabet's fourth quarter revenue rose 22 percent from a year ago to $39.28 billion, compared to the average expectation of $38.93 billion among analysts tracked by Refinitiv.
"Capex is growing at a sizable clip and the primary driver continues to be investing in technical infrastructure to support growth", Alphabet Chief Financial Officer Ruth Porat said in an interview with Bloomberg TV. The company's operating margin, a closely watched measure of profitability, was 21 percent, down from 24 percent. As a reminder, "other revenues" encompasses Google's hardware business - so new products like the Pixel 3 and Pixel 3 XL as well as the Google Home Hub, along with things like Google Play and various paid Google services, all contributed to that growth.
Alphabet's head count grew to almost 99,000 from 80,000 employees during the course of the year as expenses at the internet colossus climbed.
Alphabet shares were down 3.3 percent to $1,103.50 in after-market trades that followed release of the earnings figures from the final three months of previous year.
Google network revenues - display ad cash from non-Google sites - were $5.6bn were up 12 per cent from $5bn last year's quarter.
What do Alphabet's Q4 results mean for their share price?Cloud bets are likely to start paying off in the coming years, said Wedbush Securities analyst Daniel Ives.
The loss a year ago related to a one-time charge from new USA tax rules, while earnings since then have benefited from new rules about valuing Alphabet's dozens of investments in external startups.
Another Google segment of wide interest, called "Other Bets", that includes such companies like as health venture Verily and self-driving firm Waymo, rose 18 percent, to $154 million, well short of the $187.4 million analysts were looking for. The "other bets" businesses had an operating loss of $3.4 billion in 2018, or about $4 per share.
'Acquisitions are an attractive complement to what we do to drive organic growth. "We did more past year than prior, but they were small".