Published: Thu, May 02, 2019
Markets | By Otis Pena

Google ad revenue growth slows for 4th consecutive quarter

Google ad revenue growth slows for 4th consecutive quarter

Hardware sales also slowed during the quarter for the Pixel phone, Google chief financial officer Ruth Porat said on Monday's call, reflecting a broader industry slowdown in smartphone sales. TAC now amounts to 22 per cent of Google's ad revenue, down from 24 per cent.

Alphabet executives talked up the company's growing prowess delivering "cloud" and AI-based services.

Google is a partner, demand driver and - to a tiny but worrisome extent - competitor to telcos, cable companies and other service providers. Alphabet shares dropped more than 7% in after-hours trading.

Alphabet, Google's parent company, saw its stock tumbling 7 per cent after the company suggested that recent ad product changes in YouTube and Search are hurting its top-line growth. Ads for mobile devices bring in less money.

"We remain focused on, and excited by, the significant growth opportunities across our businesses", she said.

Some analysts suggested that it is a signal that Google might need to diversify its business more quickly.

"Does this put more pressure on Google to make more aggressive bets on cloud?" asked Wedbush Securities analyst Dan Ives. The company doesn't break out YouTube and cloud revenue, but the two are important sources of future growth.

Sundar Pichai, the CEO of Google, pointed out that the company would continue to invest in YouTube to solve the problems with misinformation and disturbing content considering children and other strata of the population.

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Alphabet did disappoint investors with a deceleration in certain growth metrics but this doesn't translate to slower profit growth, Hargreaves said.

In a quarter made murkier by accounting changes announced earlier this month, Alphabet Inc. reported a first-quarter profit of $6.6 billion, or $9.50 a share, down from $13.33 a year ago when it got a big boost in income from its stake in Uber Technologies Inc.

Analysts polled by FactSet on average had expected the company to post a profit of $10.53 a share before the recent fine.

Alphabet recorded a European Commission fine of $1.7 billion in the quarter as a settlement for stifling competition in the online ad sector. The Google segment offers products, such as Ads, Android, Chrome, Google Cloud, Google Maps, Google Play, Hardware, Search, and YouTube, as well as technical infrastructure. "The company was still experiencing tailwinds at this time last year, and is now experiencing headwinds on ad prices, making for a less rosy year-over-year comparison". Some regulators express concern that the largest companies are so big that they're stifling competition. That category generated $5.4 billion revenue, up 25% annually.

Its parent company Alphabet reported revenues of $36.3 billion for Q1, missing analyst estimates by over a $1 billion.

The California giant showed widening losses for its "other bets" including the Waymo self-driving vehicle project, Verily life sciences and services for internet for remote parts of the world and drone delivery.

Alphabet paid a higher tax rate this quarter, to 18 percent from 11 percent The number of employees in the quarter rose to 103,459 from 85,050 the year earlier.

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