Google reminds investors that rapid growth is not guaranteed

Google investors may have had a flashback Monday on the bad old days of the company in 2015.

This year can feel like a distant memory. It was before news cycles were measured in seconds. It was before people seriously discussed the actions of FAANG and before Mark Zuckerberg attended multiple rounds of congressional hearings. At the time, Google's growth seemed to be hit against a wall and investors did not trust it to spend its money wisely.

On Monday, people with memories of more than a few milliseconds were surprised when Alphabet Inc., Google's parent company, reported relatively modest revenue growth in the first quarter, despite limited spend to Google's standards.

The company said its advertising revenue in the Google segment had increased about 15% over the previous year, which was the lowest growth rate since the end of 2015.

A slightly unstable quarter does not detract from Google's impressive record of steady growth since the difficult period of several years. Technology investors, however, are very concerned in recent times about US economic expansion and increased attention to the power of technology companies.

Monday's results – combined with some growth misses at Amazon, Apple and Facebook – showed the potential vulnerability of the powerful combination of fast growth and tantalizing profits from the superstars of American technology. It's this combination that has fueled the US stock market, and that's what investors are now expecting from technology titans.

There did not seem to be obvious culprits and the company did not disclose enough detailed information about its large businesses to diagnose possible temporary problems. Alphabet on Monday raised the weakness of currencies on some of its major markets, which weighed on the company's reported turnover in dollars. Leaders hinted at some changes in YouTube ads and the timing of ad formats that weighed on revenue growth. And to be honest, most of the companies close to Alphabet's annual revenues of more than $ 140 billion would be pleased to grow at a rate comparable to that of Alphabet.

Alphabet told investors three months ago that its spending growth rate would slow in 2019 and that the company followed in the first quarter. Excluding the impact of Alphabet's recent fines on European regulators, Alphabet's operating profit exceeded expectations and its expenses slowed down for major capital projects such as processing centers. of data.

Investors have been worried about Alphabet's spending recently, as the company's growth rate has remained high. But the opposite is true and the observers of the companies would be forgiven for wishing growth to return.