Google's parent Alphabet misses Wall Street forecasts, hit by strong US dollar

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A wave of big names came out with earnings results that fell short of expectations after hours on Thursday. The Dow fell below 18,000.
Google's parent Alphabet Inc missed Wall Street targets for first-quarter profit and revenue on Thursday (April 21). PHOTO: REUTERS

NEW YORK (REUTERS) - Google's parent Alphabet Inc missed Wall Street targets for first-quarter profit and revenue on Thursday (April 21), driving shares of the Web search company down 6 per cent in late trading on Thursday.

Alphabet, the world's No 2 publicly traded company by market capitalization, just missed analysts' revenue targets, citing the strong US dollar.

Rosenblatt Securities analyst Martin Pyykkonen said the effect of foreign currency was worse for Alphabet than expected.

"If there had been a little better foreign currency translation, it would have been better than the Street consensus," he said.

The company said consolidated revenue rose to US$20.26 billion from US$17.26 billion. That was slightly below the US$20.37 billion analyst consensus, according to Thomson Reuters I/B/E/S. Earnings per share of US$7.50, excluding one-time items, missed the analyst target of US$7.97.

"As a result of the ongoing strength of the US dollar, we realized a negative currency impact on our revenues year-over-year of US$762 million, or US$593 million after the benefit of our hedging program. Holding currency constant to prior periods, our total revenue grew 23 per cent" year-over-year and declined 4 per cent sequentially reflecting holiday seasonality," Alphabet chief financial officer Ruth Porat said on a call after results were released.

Google's advertising revenue increased 16.2 per cent to US$18.02 billion, while the number of ads, or paid clicks, rose 29 per cent, the company said.

Payments to other web sites, known as traffic acquisition costs, rose 13 per cent from the previous year to US$3.8 billion, and they increased as a percentage of revenue within the Google Network of advertising, Ms Porat said.

That reflects a higher percentage of advertising on mobile and programmatic advertising, an automated system of buying ads. Those are areas Google has targeted for growth and carry higher traffic acquisition costs, she said.

"On the advertising and marketing front, the landscape is changing, it's no longer a Google-centric world in mobile," said Andrew Frank, a senior analyst at Gartner.

Losses increased at the company's Other Bets business, which includes its broadband business Google Fiber, home automation products Nest, self-driving cars and X - the company's research facility that works on "moon shot" ventures.

The loss widened to US$802 million, up from US$633 million a year earlier. Revenue rose to US$166 million from US$80 million.

Alphabet's net income rose to US$4.21 billion, or US$6.02 per Class A and B share and Class C capital stock, from US$3.52 billion, or US$5.10 per share.

The company's shares fell to US$732.94 in after hours trade from a close of US$780.

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