Alphabet's stock sank after Q1 revenues missed Wall Street targets

Google owner Alphabet misses sales forecasts

Google parent Alphabet lost roughly $70 billion in market value in intraday trading on Tuesday after reporting signs of slowing revenue growth, especially in its critical digital advertising business.

Alphabet said its quarterly revenue rose 17 per cent from a year ago to $36.3 billion, compared with Wall Street's average estimate of $37.3 billion, according to IBES data from Refinitiv.

According to US GAAP, Alphabet first-quarter net profit (which included the impact of fines) is $6.657 billion, down 29% from $9.401 billion in the same period previous year.

The latest quarter results included a US$1.7 billion fine by the European Commission for having placed anticompetitive advertising restrictions on websites using its search widgets.

The results also show Alphabet's revenue growth slowing to 17 per cent from the quarter, compared to 26 per cent a year ago.

Still, Google continues to rake in money from its advertising business, making $30.7 billion this quarter. By the end of Alphabet's call with analysts, the stock had fallen 7%. It came despite revenues rising to $36.3bn.

This quarter may be more hard to assess immediately, since Alphabet has changed the way it accounts for some costs and gains. Google capital expenditures dropped sharply in the quarter, in part because of a jump in real-estate spending in the year-earlier period.

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Google executives highlighted the company's cloud-computing business as one of its fastest growing segments during the Monday call.

Shares tanked 7.3 percent following the earnings announcement, eroding more than $60 billion off Alphabet's market cap. The company doesn't break out YouTube and cloud revenue, but the two are important sources of future growth.

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.

Google CEO Sundar Pichai reiterated those remarks, saying that the entire industry was facing "year-on-year headwinds". Profit amounted to $11.90 per share, well above Wall Street estimates of $10.60. However, the overall segment's rate of growth pales considerably next to AWS' and Microsoft's cloud growth. Analysts were looking at revenues of $172.2 million.

Even though revenues climbed, quarterly profits dipped a significant 29 percent to $6.7 billion.

Analysts said the "lack of transparency" over the cause of the slowdown was frustrating for both them and investors. "We will continue to make changes with a focus on the long-term best interest of users and advertisers". Along with Facebook, it commands the lion's share of digital advertising and possibly all of its growth in aggregate versus the other players.

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