Alphabet reports solid Q1 but Wall Street concerned about big bets

22 Apr 20161 Share

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Google's parent company Alphabet is making the difficult transition from web-based advertising to mobile-based search and display advertising

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Google parent company Alphabet’s stock slid 6pc in overnight trading as Wall Street reacted unkindly to the company’s earnings not meeting analyst forecasts, despite reporting solid profits and revenue growth to $20bn.

Strangely, investors barely batted an eyelid when the European Commission drew up formal charges against Google alleging it uses its Android mobile software to promote it products over rivals, but they were spooked when Alphabet’s net income and earnings per share didn’t match their own vaunted forecasts.

Revenues at Alphabet were up to $20.2bn from $17.2bn a year ago, a 12pc increase.

‘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’
– RUTH PORAT, ALPHABET

Google’s parent company Alphabet also saw net income grow to $4.2bn from $3.5bn a year ago.

But what possibly has made the market tetchy is the company’s big bets on areas like Nest and Boston Dynamics, as there have been signals that all is not well in these camps.

Revenues from what Alphabet calls “Other Bets” were up to$166m from $80m a year ago. However, losses from “Other Bets” have plunged deeper from $633m a year ago to $802m.

Drilling down into its Google business, revenues from Google websites jumped 20pc during the year from $11.9bn to $14.3bn

Alphabet is also making the difficult transition from web-based search and display advertising to mobile and has beefed up its engineering and product management capacity significantly.

The total number of employees at Alphabet jumped from 55,000 to 64,000 last year.

“Our Q1 results represent a tremendous start to the year with 17pc revenue growth year-on-year and 23pc growth on a constant currency basis,” said Ruth Porat, CFO of Alphabet.

“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 said.

Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com