Google-parent Alphabet misses first-quarter revenue estimates

Google headquarters in Mountain View California.                  Stephen Shankland  CNET

Alphabet executives deflected concerns of growing competition on a conference call with analysts Monday, instead suggesting that fluctuating currency rates and changes to Google ad products during the quarter led to the slowdown.

San Francisco - Shares of Google-parent company Alphabet is sliding on the back of a rare earnings miss by the Internet giant.

"Google ad revenue growth has been slowing amid downward pressure on ad prices, especially for revenues coming from worldwide markets", Monica Peart, senior forecasting director for ad research firm eMarketer said in a statement. The disappointing result came amid intense competition in the advertising business from the likes of Facebook and Amazon, tech rivals that each reported strong quarterly results in recent days. The company's revenue also saw slowing growth in the quarter after it rose 21.6% YoY (year-over-year) in the fourth quarter of 2018. Traditionally the service's bread and butter, Google said paid clicks grew by 39% year-over-year, a far cry from the 66% growth at this point last year. This figure fell 19% YoY but rose 5% sequentially in the first quarter.

Asked on the call when Google expects to share specifics on cloud financials, what GCP's competitive differentiators might be, and what changes GCP head Thomas Kurian has implemented, Google CEO Sundar Pichai offered only generalities without a specific commitment about when Google will provide more insight into the workings of its cloud business.

But positive macroeconomic signals have given them reason to believe that the company's ads business is healthy.

While Google's business did not actually shrink, the slowing growth suggests this may be the destination in the future.

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This quarter may be more hard to assess immediately, since Alphabet has changed the way it accounts for some costs and gains.

Alphabet has said its spending increases are justified, with huge outlays going to offices, data centres and artificial intelligence capabilities in line with the expected demand for its services.

Google's Other segment, which includes the Play Store, Cloud Platform (GCP), hardware, YouTube Music, and such, reached $5.45bn in revenue, up 25 per cent from $4.35bn. Other regulators have discussed forcing companies to step up monitoring of user content.

The latest quarter results included a $1.7 billion fine by the European Commission for having placed anticompetitive advertising restrictions on websites using its search widgets. Alphabet could see similar gains later this year as other highly valued startups in which it has ownership, including transport app Uber Technologies Inc and workplace software firm Slack Technologies Inc, make their public debuts.

According to US GAAP, Alphabet first-quarter net profit (which included the impact of fines) is $6.657 billion, down 29% from $9.401 billion in the same period a year ago. Excluding the EC fine, Alphabet said earnings were $11.90 per share.

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