Google parent Alphabet misses estimates; news not all bad

alphabet google anniversary business changes becomes
zhu difeng/Shutterstock
All’s not well in the Alphabet world — but it could be worse. Google’s (relatively) newly minted parent company announced its 2016 first-quarter earnings on Thursday, and they’re a bit under what investors were expecting. Alphabet raked in revenue of $20.26 billion, or $7.50 per share, during the period from January to March. Wall Street was hoping for an extra cent here and there — $7.97 on $20.37 billion in revenue, according to data compiled by Reuters.

Predictably, the market is responding in kind. Alphabet’s stock is down about 5 percent in extended trading as of publication time.

So, what’s to blame for the miss? To some degree, it’s the falling price of Internet ads, a business that remains Google’s — and by extension Alphabet’s — bread and butter. Aggregate cost-per-click — how much advertisers are willing to pay for ads, essentially — fell about 9 percent from the same time last year, a steeper decline than the 5.8 percent that industry watchers were predicting. And separately, currency ups and downs impacted revenue. In the earnings report, Alphabet CFO Ruth Porat pointed to “ongoing strength of the U.S. dollar” as a major contributor to the year-over-year decline. “Our Q1 results represent a tremendous start to the year, with 17 percent growth year on year and 24 growth on a constant currency basis,” she said.

It’s not all doom and gloom, though. Alphabet’s overall first-quarter earnings were a substantial bump from the $6.47 a share it reported in the same period last year — a climb of about 16 percent. Paid ad clicks during the first quarter were also up a substantial 29 percent year over year, and the company’s Android business — now the “fastest-growing segment” of its revenue, according to Google CEO Sundar Pichai — performed quite well, bringing in $2 billion in Play Store and hardware sales.

Beyond ad and app sales, Pichai pointed to artificial intelligence and cloud computing as growing revenue drivers. “We’ve always been doing cloud … but as we’ve grown — really matured in how we handle our data center investments and how we can do this at scale — we’ve definitely crossed over to the other side to where we can thoughtfully serve … customers,” he said during today’s earnings call. Google previously predicted its cloud revenues will surpass its advertising revenues by 2020. “In the long run, I think we will evolve in computing from a mobile-first to an AI-first world.”

The surprise moneymaker this past quarter was Alphabet’s “Other Bets” category, the division that includes “moonshots” like Nest, Google Fiber, Alphabet’s life sciences and driverless car divisions, and other experiments. Investors expected revenues of $140.7 million this quarter, but the segment blew past those predictions with $166 million. That’s not to say Other Bets has quite reached profitability — it posted an operating loss of $802 million compared to last quarter’s $633 million on revenues of $80 million — but Alphabet execs confident in the category’s growth potential. Porat said that Google Fiber’s buildout represented a significant portion of the first quarter’s expense, and future cost growth would be mitigated by the “consolidation” of teams pursuing similar objectives. “We’re thoughtfully pursuing big bets and building exciting new technologies, in Google and our Other Bets, that position us well for long-term growth,” she told investors.

Some of that consolidation may take the form of sales. Alphabet is reportedly planning to spin off Boston Dynamics, a high-tech robotics lab it acquired in 2013.

All considered, though, Alphabet performed admirably this year. The company’s stock price has risen more than 43 percent over the past several months, and it briefly leapfrogged Apple in February to become the most valuable company.

Computing

Apple preps production of updated MacBook Air for a 2018 launch

To reach its rumored launch timeline of later this year for its low-cost notebook, Apple is expected to begin production of its updated MacBook Air soon. The sub-$1,000 laptop could launch as early as September or October.
Mobile

Motorola Moto Z3 vs. Moto Z3 Play: Is Motorola's latest flagship worth buying?

Motorola has finally taken the wraps off of its latest flagship phone, the Moto Z3. But with slightly different-than-expected specs and a very similar design, is it really that much better than the Moto Z3 Play?
Gaming

‘Red Dead Redemption 2’ gameplay shows off 6 minutes of Rockstar’s Western

Rockstar Games has released the first gameplay footage for Red Dead Redemption 2, and the Western appears to be even deeper and more varied than we were expecting. The game launches this October.
Social Media

Three million people quit Snapchat after the redesign

After a million users signed petitions to get the old Snapchat back, the network's user count is showing the early results of the changes with a three-million-user drop in daily active users.
Smart Home

Samsung SmartThings adds A.I.-based Wi-Fi for faster, smarter home networking

Samsung introduced the SmartThings Wifi, an A.I.-based multifunction mesh networking router with an integrated smart home hub. The device intelligently allocates network speed and bandwidth based on device and application needs.
Mobile

MetroPCS Alcatel 7 boasts a dual-sensor camera and FHD+ screen for $180

Alcatel has taken the wraps off of the new Alcatel 7, a phone that's uniquely available from MetroPCS. The new device boasts a full HD display with a dual-sensor camera and a relatively nice design, and it comes in at only $180.
Product Review

Someday it will do 5G, but the Moto Z3 is already a great phone

Motorola’s flagship smartphone of 2018 looks exactly like its mid-range smartphone of 2018, but powered by a processor from 2017. It’s still a great-performing phone for $480, and it will be the first upgradable 5G smartphone next year.
Mobile

Bloatware could be putting millions of Android devices at risk

A study has revealed that changes to Android's firmware and added bloatware from carriers could be making millions of Android smartphones vulnerable to massive hacks and potential data theft.
Mobile

Marco? Polo! Let's explore the app known as the 'video walkie-talkie'

Marco Polo has been dubbed the "video walkie-talkie," but how does the video messaging app stack up against competitors like Snapchat and Instagram? From unique filters to personalized video messages, we explore the Marco Polo app.
Mobile

Samsung confirms the Galaxy S10 won't be the first 5G phone

It may be no more than a sparkle in Samsung's eye, but the Samsung Galaxy S10 is definitely coming. Here's everything we know about what's sure to be Samsung's most amazing creation so far.
Mobile

Samsung confirms the debut of its foldable smartphone isn't far away

Samsung has been showcasing bendable display tech for a few years now and a folding smartphone might finally become a reality. The Galaxy X, or perhaps the Galaxy F, may be the company's first example. Here's everything we know about it.
Apple

Apple's AirPower charging pad may cost $150, sport 22 wireless charging coils

At its September event last year, Apple unveiled the AirPower -- its new wireless charging mat that will allow you to charge multiple devices at one time. It has not yer been released. Here's everything we know about the device so far.
Mobile

Samsung Galaxy Note 9 vs. Apple iPhone X: Battle of the ultra-premium smartphones

The new Samsung Galaxy Note 9 is the company's latest ultra-premium smartphone. The device boasts top-tier specs, an excellent design, and more. But can it take out the Apple iPhone X, Apple's own ultra-premium device?
Mobile

Need to record calls on an iPhone? Check out our handy guide

Are you wondering how to record calls on your iPhone? It isn't as easy as you might think, but we'll walk you through the process of doing so with Google Voice, and identify several other apps and external voice recorders that can help.