Published: Wed, May 01, 2019
Money | By Ethel Goodwin

Google records slowest quarterly growth since 2015 as competition mounts

Google records slowest quarterly growth since 2015 as competition mounts

Shares in Alphabet look set to plunge about 8% in pre-market trading, which would slash the market cap of Google's parent company by about $70 billion to $831 billion, as investors lashed out after a mixed first-quarter earnings report. The high prices put the phones in close competition to rival flagship devices from Apple and Samsung. They had expected first-quarter revenue of $37.33 billion, or $30.34 billion after accounting for the $7.26 billion cost of acquiring traffic. The shortfall drove Alphabet's stock down about seven per cent in after-hours trading, and you can read the full results for Alphabet's three months to March 31 here [PDF].

However, Alphabet earned $11.50 a share before a $1.7 billion fine by European regulators charged to the quarter. Excluding the fine, profits would have been $8.34 billion, or $11.90 per share, versus $9.4 billion during the same quarter past year.

Alphabet Chief Financial Officer Ruth Porat attributed slower revenue growth to currency fluctuations, competition and unspecified product changes.

In an interview with Bloomberg TV, Porat shrugged off Amazon's foray into advertising and said there's still lots of room for growth for all digital ad companies because so much marketing money is still spent offline.

Indeed, about 84.5% of revenue for the period came from Google's ad business.

"As expected, Google ad revenue growth has been slowing amid downward pressure on ad prices, especially for revenues coming from worldwide markets", eMarketer Senior Forecasting Director Monica Peart said in an email.

"We delivered robust growth led by mobile search, YouTube, and Cloud with Alphabet revenues of $36.3 billion, up 17% versus previous year, or 19% on a constant currency basis", said Ruth Porat, Chief Financial Officer of Alphabet and Google, in a statement.

And while it isn't a big business for Google, the firm did mention that its smartphone operations encountered "year over year headwinds", meaning that it sold fewer handsets than it had in the year-ago quarter. Alphabet said the deceleration was driven by the slowing rate of clicks on YouTube ads.

Interestingly, Google's "Other Bets" unit, which includes self-driving vehicle business Waymo, incurred losses of $858 million, widening over 50 percent from $571 million a year ago.

A slowdown in Google's ad revenue could be the reason for the missed targets. But Alphabet said that the growth of its cloud and Play business was partially offset by weak hardware sales. "We are still in early days, but our commitment is very strong", Pichai said.

Porat wouldn't go into detail into exactly what challenges the Pixel 3 faced. The company plans to announce new hardware products on May 7.

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