Digital ads lift Google but shares hit by costs

Anna Jefferson
February 6, 2019

For the period ending December 31st, Google recorded $6.8 billion in capital expenditures driven by spending on offices, data centers and servers, said Ruth Porat, Google's chief financial officer, on a conference call discussing Alphabet's quarterly earnings Monday. "But with talk of economic pressures on the horizon in the US, noticeable sluggishness in their fourth-quarter performance could warn of more dramatic slowdowns in the digital advertising market, which had been relatively insulated while the ad giant enjoyed strong double-digit growth rates".

Alphabet CFO Ruth Porat has stated that the company's rate of growth will slow further, but continued investment in shoring up its flagship products is expected to stand Google and its other interests in good stead.

Alphabet reported most of its profits from sales from Google and its advertising units, which brought in about 32.64 billion in the fourth quarter.

Overall, Alphabet revenue was $136.8 billion for 2018, up 23% year-over-year, with $39.3 billion quarterly revenue, up 22%, the company said.

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FILE PHOTO - The Google name is displayed outside the company's office in London, Britain November 1, 2018. The global market for advertising appears to be finite, and Google and Facebook already grab a large share of spending. Shares of the Mountain View, California-based company rose 1.1 percent at 10:25 a.m.in NY on Monday amid a broader rally in technology and and internet stocks that included Facebook, Netflix, Microsoft and Apple.

The fees that Alphabet pays to companies like Apple for Google to be their default search engine rose to $7.4bn up from $6.6bn for the same period a year ago.

Google also had to pay more to attract traffic.

Online commerce grew quickly in the final quarter of 2018, helping Google's ad business. "We'll continue down this path".

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R&D spending has risen 40% and Alphabet's total headcount has increase by 4,000 going into the last quarter of 2018.

Earnings per share on the year were $43.70, up from $18.27 last year, but short of $45.79 analysts estimated.

"Other bets", as Alphabet calls its more experimental businesses including Waymo, the self-driving auto startup, its fiber optic cable business and Verily, its health division, had revenues of $154m. However, those operations showed a $1.3 billion operating loss.

"Everything we do at Google is united by the mission of making information accessible and useful for everyone", said CEO Sundar Pichai during the earnings call.

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How well Google fares with investors will depend on how aggressively the tech giant tackles cloud computing services in the next year, either organically or through acquisitions.

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