Skip to main content

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.

Editors' Recommendations

Kyle Wiggers
Former Digital Trends Contributor
Kyle Wiggers is a writer, Web designer, and podcaster with an acute interest in all things tech. When not reviewing gadgets…
Best Samsung Galaxy Z Fold 4 deals: Save big on the foldable
A person holding a partially open Galaxy Z Fold 4.

With the launch of its predecessor, it's the best time to hunt for discounts on the Samsung Galaxy Z Fold 4. It's not going away any time soon because it's still a very fun and capable mobile device, so there will be a lot of demand for savings when buying the foldable smartphone. We've gathered the top ways of getting the Samsung Galaxy Z Fold 4 for cheaper than usual, but you'll have to hurry with your purchase because these offers may disappear at any moment.
Samsung Galaxy Z Fold 4 deals at Samsung
The obvious source for a Samsung Galaxy Z Fold 4 is Samsung, which is offering trade-in credit of up to $725 for an unlocked 256GB model of the smartphone that normally costs $1,800. However, you can get it at $800 off, so you'll only have to pay $1,000, if you buy it with a U.S. Cellular plan.

Samsung Galaxy Z Fold 4 deals at Amazon
The unlocked 256GB Samsung Galaxy Z Fold 4 is on Amazon for its retail price of $1,800, but why would you get that model when the unlocked 512GB Samsung Galaxy Z Fold 4 is cheaper at just $1,450, following a $470 discount on its original price of $1,920? It's a no-brainer to go for the version with the larger storage capacity when it's more affordable.

Read more
Best iPhone 15 deals: How to get Apple’s latest iPhone for free
The display on a green iPhone 15.

The iPhone 15 has only just hit stores but that hasn't stopped there being some great iPhone 15 deals going on right now. If you're keen to upgrade to the shiniest of new iPhones, this is your chance to do so. We've picked out all the best iPhone 15 deals going on at the moment including how to get the phone for free. Here's what you need to know about iPhone deals on Apple's latest model.
iPhone 15 deals at Amazon

Amazon has one of the best ways to get an iPhone 15 for free. Sign up to Boost Infinite and you get the Apple iPhone 15 for free. That saves you the $830 you'd normally pay, while Boost Infinite costs $60 per month and gives you unlimited talk, text, and data every month. It's a near-unbeatable deal for many people.

Read more
The Fitbit Charge 6 is a fitness tracker and smartwatch hybrid
A Charge 6 being used on a wrist.

Fitbit has finally embraced what it means to be owned by Google with the Fitbit Charge 6. Not only is the Charge 6 an impressive-looking fitness tracker with a more accurate heart rate tracker, but it's also the first Fitbit device to really lean on the vast data resources offered by its parent company, Google. These additions have moved the Charge 6 toward becoming more of a smartwatch, thinning the barriers between the two device types.

Fitbit was purchased by Google in January 2021, but outside of Fitbit's tech being front and center in the fitness section of the Google Pixel Watch, it hasn't meant too much change for the fitness tracker brand. That ends with today.

Read more