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Google parent Alphabet reported quarterly results Feb. 4. 

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Google’s parent company posted a big jump in quarterly revenue last week, but also ever-rising costs outside its core online-advertising business, showing the drag from its efforts to diversify.

Despite monster results in internet search, Alphabet shares fell as investors zeroed in on shrinking margins and slower revenue growth overall.

Alphabet, with its tentacles stretching across the technology industry, is central to a sector that has become a bellwether for the U.S. stock market. The business empire formerly known as simply Google includes the eponymous search engine as well as its closely watched YouTube division and high-profile Waymo self-driving-car unit.

Ramped-up spending on those ancillary businesses in the fourth quarter helped push margins down to 21 percent, from 24 percent in the year-earlier period.

The latest quarter also brought a record research and development bill: $6 billion, up 40 percent.

Alphabet’s report closes on a mixed bag of year-end results for Silicon Valley’s tech giants, with international factors among the largest variables. Apple Inc.’s revenue and profit declined in part due to weakness in China, while Inc. warned that government restrictions in India could pinch its revenue there.

Facebook, meanwhile, posted a record profit, aided by its workmanlike ability to squeeze more money and time out of users in the U.S. and Canada — its most lucrative markets — despite mounting public criticism of its practices.

By some metrics, too, Alphabet’s growth seems unrelenting. To the chagrin of new-media startups recently forced to lay off staff, Facebook and Google continue to capture the bulk of online advertising dollars.

But if the Google ad juggernaut faces few major threats, analysts and investors are still eager for hints on the performance of other units. The company remains tight-lipped about their profitability.

On the quarterly call Feb. 4, Google Chief Executive Sundar Pichai took time to hail the success of the artist Ariana Grande’s music video for the single “thank u, next” on YouTube. But he and finance chief Ruth Porat declined to break out the unit’s financial results, beyond saying that costs are rising amid torrid competition for content.

Pichai said he sees YouTube as a showcase for the company alongside its powerhouse search business. “In the long run, for me, YouTube is a place where we see users come not only for entertainmen. They come to find information.”

Alphabet likewise has declined to detail much in its Other Bets category, which includes the company’s furtive efforts to develop advanced technologies.

Asked directly about spending on such moonshots, Porat said: “We are investing across Other Bets commensurate with what we think is required.”

Analysts and investors warn they expect costs outside search to build as Alphabet invests further in its cloud business and other areas that require expensive, in-demand engineering talent. Despite years of efforts, Google Cloud badly trails competitors like Amazon and Microsoft. The division replaced its chief executive last month.

“Artificial intelligence and machine learning don’t come cheap,” said Colin Sebastian, senior research analyst at Robert W. Baird & Co.


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