SAN FRANCISCO: The new CEO of Alphabet, Sundar Pichai, revealed the sales figures that investors have demanded for a long time, but the shares fell 5% due to the Google advertising business and the new data on YouTube and Google Cloud greatly disappointed.
Pichai had tried to counteract the slowdown in revenue growth in the company’s main advertising business by pointing to the younger units of the Silicon Valley firm.
But Pichai reveals that Google’s YouTube video streaming unit is generating advertising revenue at a rate of $ 15 billion annually, below estimates of up to $ 25 billion.
Reporting the quarterly revenue growth of 53% for Google’s cloud services compared to a year ago meant it grew more slowly than the business it is trying to reach, Microsoft’s Azure. It reported a quarterly increase of 62% in sales last week, or 39% when considering some cloud services that Microsoft sells through other units.
While financial analysts applauded Alphabet’s new transparency, some questioned executives for the second time in the last four quarters to explain why general revenues have been lacking or have barely met their expectations. Sales growth fell below 20% in three quarters during 2019, compared to only once in the previous three years.
Alphabet has blamed currency exchange rates and its constant adjustment of features, saying it doesn’t focus on quarterly brands.
“We remain very focused on the benefit of better measurement, better ad delivery, a better user experience,” Ruth Porat, chief financial officer of Alphabet, responded to an analyst. “But there will be variability over time because we are very focused on what is the right interest in the long term.”
The company’s shares fell about 4.5% in extended operations to $ 1,416.
“The stock price was perfect, and a frontline flaw was enough to lower it,” said Michael Pachter, an analyst at Wedbush Securities. “YouTube was impressive with $ 15 billion during the year, Cloud less with $ 8.9 billion.”
Other financial analysts said YouTube’s advertising revenue was also disappointing.
“YouTube is smaller than generally assumed, but on the other hand, the search seems to have accelerated and is growing faster than feared,” said James Cordwell, an analyst at Atlantic Equities.
Google through its search engine of the same name, as well as properties such as YouTube, has been the biggest attraction of the web for advertisers for a decade, which allowed it to become last month the fourth company listed to reach $ 1 billion in market capitalization.
However, new concerns have arisen among investors about whether their domain will last as long as the US antitrust regulators. UU. Research Google and Amazon and Facebook Inc (FB.O) continue to grow your advertising businesses worldwide. Both exceeded analyst expectations last week.
Alphabet’s total sales in the fourth quarter were $ 46.08 billion, an increase of 17%, compared to an average estimate of $ 46.94 billion among financial analysts tracked by Refinitiv.
Google ad sales in the Christmas shopping quarter were $ 37.93 billion, 16.7% more than in the same period last year
Alphabet’s expenses have skyrocketed with the hiring of thousands of vendors, the construction of new data centers and the marketing of the Google brand through hardware and other companies.
For the fourth quarter, Alphabet’s total costs and expenses increased 18.5% over the previous year to $ 36.809 billion.
Porat said that contracting and infrastructure spending would accelerate in 2020.
Alphabet’s fourth-quarter profit was $ 10.67 billion, or $ 15.35 per share, compared to the average analyst estimate of $ 8.787 billion, or $ 12.53 per share.
Hardware sales fell in the fourth quarter compared to the previous year, Porat said. The results could be affected by any prolonged work stoppage in Asia as companies fight the outbreak of a new coronavirus in China, he said.
Google last week temporarily closed all its offices in mainland China, Hong Kong and Taiwan due to the coronavirus. It has thousands of engineers across the region, including a hardware engineering center in Taiwan.
In December, Google’s CEO, Pichai, obtained the additional role of Larry Page’s Alphabet CEO when he and fellow co-founder Sergey Brin stepped back even further from daily management.
New YouTube disclosures under Pichai showed that advertising revenue grew 31% compared to last year.
Pichai also said that YouTube, which has 2 billion monthly users, generated around $ 750 million in subscription and other non-advertising revenue, but did not reveal a figure for the period of the previous year.
Pichai said YouTube had 20 million paid subscribers between Music and Premium viewing packages without YouTube advertising, and separately had 2 million paid subscribers for YouTube TV, which competes with Sling TV from Dish Network and Hulu from Walt Disney to stream television online.
Amazon recently said it has 55 million music subscribers, while Apple Inc (AAPL.O) last year announced 60 million subscribers. Sling had about 2.7 million subscribers as of last year, in line with estimates for Hulu.
Alphabet shares rose 28.1% in the last 12 months entering Monday, compared with 21.8% of Facebook shares, 23.5% of Amazon, 68.1% of Microsoft and the 88.7% of Apple Inc (AAPL.O).