Google has missed a beat in the recent wave of revenue growth that drove its shares of parent Alphabet to record highs, causing a quake on Wall Street as investors fear this could be a turning point in their top advertising business.
Alphabet shares fell more than 7 percent in the market after Monday after the company reported revenue growth of 17 percent in the first three months of the year – a huge number for a company whose quarterly revenue hit $ 36 , 3 billion, but still about $ 1 billion less than most analysts expected.
The Alphabet blamed the lack of a number of factors, including the strength of the dollar, a difficult comparison with a strong quarter last year and a consideration of time that left it with fewer improvements in advertising services in recent months that may have boosted recipe. higher.
However, the lack of detail has left many on Wall Street struggling to understand whether Google's ad business may be starting to suffer from more serious issues, such as weakening advertiser demand or increased competition from Amazon, which has made an effort at search market .
"It's very difficult to know for sure, there are many moving parts," said Youssef Squali, SunTrust analyst Robinson Humphrey. Google executives did not clarify a link with analysts of the company exactly how the timeline of changes in its advertising services had contributed to the slowdown, he said.
"They were very, very opaque about what the changes are and the impact of the changes," he said, but added that Alphabet's revenue growth: "It's showing potential signs of tension."
A year ago, a 25% jump in revenue coincided with an acceleration of the growth of large Internet consumer companies in order to prepare the scenario for a strong stock price recovery in the sector.
The rise in the US dollar has been a significant factor in the downturn since then, said Ruth Porat, chief financial officer – currency fluctuations added 3 percentage points to growth in the first three months of 2018 but erased 2 points of growth this year.
She also warned that "the timing of changes in the product can impact growth rates year by year" – a standard caution of Google executives, but more pronounced this time around.
Changes in advertising on YouTube contributed to a huge jump in the number of times Internet users clicked on Google ads in the first three months of last year, jumping 59%. In contrast, without further changes with an equally powerful effect, the click growth rate dropped to 39% in the last quarter.
Sundar Pichai, chief executive, said the company does not manage the timing of the new services around the quarterly results calendar. "We have a long-term view of where we want to go. You will get variations from quarter to quarter from time to time, "he said.
While revenue performance has disappointed investors, Alphabet posted stronger gains than analysts predicted in the first quarter – the opposite of what investors expect from the company, which has invested heavily in growth in recent quarters.
Alphabet profits in the period fell 29 percent to $ 9.50 as they charged a fine of $ 1.7 billion to cover the cost of an EU fine in March, which regulators said was a restriction against advertisers.
Without that, it would have reported earnings per share of $ 11.90, or more than the $ 10.58 analysts expected. The numbers have benefited from the lower costs of acquiring traffic on Google, or the money the company pays to partners who run their ads, and lower-than-expected marketing spending.
Alphabet's overall capital spending also dropped 40 percent to $ 4.5 billion after reaching $ 25.1 billion last year.
However, Ms Porat indicated that Google was not planning to give up its heavy investments this year. Capital expenditures were expected to rise from the intoxicating 2018 level, albeit at a much slower pace. The company has earmarked $ 13 billion in the US alone this year for investment in new data centers and office expansion.
* This article was amended from the original to correct the value of the impact after taxes on profits