Google parent Alphabet’s profit disappoints

Google’s online ads have generated more cash than ever, but rising costs helped cut Alphabet’s profit 23pc.

Alphabet’s profit for the latest quarter was lower than Wall Street’s expectations. Picture: AP

Google’s third-quarter results showed the complexity of operating an internet empire, as steady growth in online advertising sales was overshadowed by rising costs and a weak showing from some long-held company investments.

Its parent, Alphabet, reported revenue of $US40.5 billion, a rise of 20 per cent from the same period last year.

While that would be enviable growth for many companies, the clip is modestly below Google’s pace historically. Also, for Google more than most others, strong results raise concerns about its market dominance. Its ad revenue rose 17 per cent to $US33.9 billion, contributing to an overall profit of $US7.1 billion.

Analysts and investors are encouraging the company to continue its pursuit of new advertising opportunities for such units as its YouTube video platform and the ubiquitous Google Maps app. Yet such efforts to generate profit across the conglomerate could further animate antitrust regulators.

The Trump administration and 50 attorneys general have already opened wide probes into Google, including whether it has an unfair advantage over smaller advertising rivals.

The Department of Justice’s antitrust chief, Makan Delrahim, said last week that a break-up of Silicon Valley’s tech giants is “perfectly on the table” as part of evaluations of whether companies abuse their market power.

Alphabet’s profit for the latest quarter was lower than Wall Street’s expectations and down 23 per cent from a year earlier, when the result was boosted by changes to the US tax code. The company’s margin for the third quarter was also crimped as costs rose, a long-term concern for investors.

Alphabet’s stock fell 1 per cent after hours. The shares are up roughly 25 per cent this year, in line with the broader technology market.

Advertising is central to the Google narrative, constituting the majority of the company’s revenue, and also because the company is scant with disclosures on other areas of its business. Alphabet has resisted requests from analysts to detail the performance of YouTube, for instance, and combines results from nascent units like the Waymo self-driving car division, hardware and cloud computing in a line item that Google simply calls “Other Bets.”

Dow Jones Newswires