Google Q1 revenues $36.3 billion but miss Wall Street expectations

Ann Santiago
May 2, 2019

Alphabet Inc (NASDAQ:GOOG) shares plunged in overnight trading in NY after the Google owner missed expectations with its first-quarter results.

"We delivered robust growth led by mobile search, YouTube, and Cloud, with Alphabet revenues of $36.3 billion, up 17 percent versus past year", Alphabet Chief Financial Officer Ruth Porat said.

Investors don't care about big fines, as long as companies still make a ton of money - but all bets are off if revenue growth doesn't live up expectations.

Paid clicks growth slows.

The company's stock fell about 3% on the news in after-hours trading.

George Salmon, equity analyst at Hargreaves Lansdown, said: "Another EU fine won't have washed well with investors, but in reality it's not the cheque on its way to Brussels that's causing the shares to drop". The sluggish growth is a direct result of declining ad sales as Google faces competition from other quarters, namely Facebook and Amazon.

Alphabet's first-quarter revenue missed analysts' estimates, sparking concern that advertisers are shifting some spending from Alphabet's Google subsidiary to digital rivals. However, the rise was the slowest since 2016 and compared with growth of 26% for the same quarter a year earlier.

Speaking of expenses, part of that $29.7 billion number includes a $1.7 billion fine which Google had to pay to the European Commission for infringing on competition laws with AdSense and Google Search.

"Overall, we expect GOOGL shares to be under pressure in the near-term given sub-20% revenue growth & downward earnings revisions", said JP Morgan in a note to clients. Without providing specific cloud figures, she said that Google Cloud Platform "remains one of the fastest growing businesses in Alphabet".

"As expected, Google ad revenue growth has been slowing amid downward pressure on ad prices, especially for revenues coming from worldwide markets", said Monica Peart, senior forecasting director at eMarketer, in a statement.

The one indication of cloud revenue comes from Google's "other revenues" segments, which is mostly cloud but also includes Google Play apps, smartphones and smart speakers. Wall Street will focus on the "other revenues" category, which includes, among other things, Google's cloud business and its self-driving auto segment Waymo, which the company has been working to monetize.

Google and Facebook, along with other internet companies, are feeling rising heat from regulatory bodies around the world as people and governments question their privacy practices. The segment posted an operating loss of $868 million, way up from a $571 million loss a year ago.

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