Google Parent Alphabet Delivers Surging Profit But Slowing Sales Growth-- 2nd Update
October 25 2018 - 5:46PM
Dow Jones News
By Douglas MacMillan
Google's parent reported surging profit on slightly slower
growth in revenue, signaling uncertainty in its core business at a
time when it is also dealing with a growing backlash from
regulators and turmoil in its own corporate culture.
Alphabet Inc. on Thursday said net profit jumped nearly 37% to
$9.19 billion in the three months through September, from $6.7
billion in the same period last year. That growth surpassed
analysts' estimates.
Overall revenue, however, grew 21% to $33.74 billion, versus 24%
growth in the same period a year ago. Ad revenue, which accounts
for the vast majority of sales, rose 20% to $28.95 billion.
The results come after a period in which Alphabet lost more than
one-sixth of its market capitalization in the span of three months.
The Google parent has been dragged down by an October stock-market
retreat. Its shares on Wednesday reaching their lowest point in
five months, before rebounding 4.4% on Thursday ahead of the
quarterly report to close at $1,097.18. Shares slipped after the
close when results were issued.
Google has been fielding questions from lawmakers in Washington
and Europe since The Wall Street Journal reported earlier this
month the company never told users about a software bug that
exposed the privacy data of hundreds of thousands of users. That
incident led the company to shutter the consumer functionality of
its Google+ social site.
Google has been racked by internal turmoil over the past year on
issues ranging from its work with the U.S. military to its handling
of gender issues in its workforce.
In a memo to employees on Thursday, Google Chief Executive
Sundar Pichai said the company has fired 48 staff members for
sexual harassment over the past two years, according to a copy of
the memo reviewed by The Wall Street Journal.
Alphabet had 80,110 full-time employees as of the end of last
year.
Mr. Pichai's memo came in response to a New York Times story
saying that Google protected three senior executives over the past
decade after they were accused of sexual misconduct, including one
who it gave a $90 million exit package. Google declined to comment
on that number. Mr. Pichai said in the memo that Google is "dead
serious about making sure we provide a safe and inclusive
workplace."
Google's core business has faced rising costs. Its payments to
distribution partners accounted for 13.1% of revenue generated by
the company's website traffic, a higher amount than the company
spent a year ago and in the second quarter of this year. That
figure is closely watched by investors who are concerned Google is
buying some of its growth through costly deals with Apple Inc. and
others.
The company's capital expenditures grew 49% to $5.2 billion as
it continues to spend heavily hiring employees and developing
futuristic technologies.
"They are plowing all their cash into reinforcing their dominant
position," said Brian Wieser, senior research analyst at Pivotal
Research Group. "The question is, are they going invest in product
that sell more ads or build flying cars which may never take
off?"
On a call with analysts, finance chief Ruth Porat said the bulk
of capital expenditure increases were due to hiring technical
talent, with the company's cloud computing unit seeing the largest
increase in staff.
Google's "other" revenue category, which includes hardware
devices and cloud computing, rose faster, up 29% to $4.6 billion
compared to $3.6 billion.
Write to Douglas MacMillan at douglas.macmillan@wsj.com
(END) Dow Jones Newswires
October 25, 2018 17:31 ET (21:31 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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