Alphabet drops on earnings miss
Alphabet stock dropped as much as 5 percent after it reported disappointing Q4 earnings, significantly missing Wall Street expectations on the bottom line while beating revenue estimates. The stock settled around 3 percent down after-hours.
- Earnings per share: $9.70 vs $9.98 expected by a Thomson Reuters consensus estimate
- Revenue: $32.32 billion vs $31.86 billion expected by a Thomson Reuters consensus estimate
Alphabet's overall revenues increased 24 percent year-over-year, driven by Google's swelling ads business, which posted $27.27 billion in revenue in Q4. Google's other revenues, which includes its burgeoning enterprise business, hardware sales, and app store, posted $4.69 billion in revenue, bringing total Google revenue to $31.91 billion.
Overall, Alphabet's 2017 revenues hit $110.9 billion, up 23 percent year-over-year.
Google's ads were getting clicked more than Wall Street expected year-over-year, and its cost per click, or how much advertisers pay, decreased slightly less that what analysts expected.
- Aggregate paid clicks: 43 percent increase year-over-year vs increase of 42.1 percent expected by StreetAccount estimates
- CPC: 14 percent year-over-year decline vs decline of 14.6 percent expected by StreetAccount estimates
CPC has been declining for years, a trend that Alphabet has attributed to the shift to mobile.
"We know we operate in a competitive market and we are focused on delivering the best experience for users and advertisers," finance chief Ruth Porat told CNBC.
Meanwhile, Google's traffic acquisition costs, which Google pays to phone manufacturers, like Apple, that use its services, like search, have continued to rise. Total TAC was $6.45 billion, or 24% of Google's advertising revenues, rising from 22 percent of revenues in Q4 2016.
Alphabet breaks out the revenues and income for both Google and its "Other Bets," like smart-home hardware maker Nest and healthcare company Verily. But it's Google's advertising business that still pumps out the profits.
The so-called Other Bets posted Q4 revenue of $ $409 million on operating losses of $916 million.
Alphabet also announced that John Hennessy will be the company's new chairman. He's been a board member since 2004 and takes the chairman seat from Eric Schmidt, who announced that he was stepping down in December.
Additionally, Alphabet noted that the recently passed tax reform resulted in a one-time expense of $9.9 billion in the fourth quarter.
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https://www.cnbc.com/2018/02/01/alphabet-earnings-q4-2018.html