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By Arjun Panchadar and Paresh Dave
(Reuters) – Google has failed to reap the benefits of a strong economy that has bolstered its competitors in the first quarter, leaving the research giant's business figure under the goals of Wall Street Monday.
Alphabet shares fell more than 5% after hours, after closing 1.5% higher to a record $ 1,296.20.
The leading competitors in advertising spending, such as Facebook Inc, Snap Inc., Amazon.com Inc., and Twitter Inc., all reported a quarterly revenue higher than or equal to analysts' expectations.
Alphabet said its quarterly revenues had increased 17 percent over the previous year, reaching $ 36.3 billion (28.07 billion pounds sterling), compared with an average estimate of $ 37.3 billion in Wall Street Street, according to IBES data from Refinitiv. Due to currency fluctuations, revenues increased by 19%.
The 17% increase is the slowest in the last three years, compared to 26% in the same quarter of the previous year.
The company said the number of clicks paid on its properties dropped 9% from the previous quarter.
Quarterly costs increased in much the same way as revenues, up 16.5% from the previous year, to $ 29.7 billion.
Spending has increased faster than revenues for much of the past two years, affecting some investors as the company's privacy practices are better monitored and efforts are made to limit advertising with potentially offensive content.
But positive macroeconomic signals have given them reason to believe that the company's advertising sector is in good health. Shares had risen 11.9% between his last earnings announcement and Monday.
About 84.5% of revenues, compared to 85.5% a year ago, came from Google's advertising industry, which sells links, banners and ads on its own websites and apps as well as those of its partners.
The 3 billion Google users make it the world's largest seller of Internet advertisements, with nearly a third of revenue, according to the EMarketer research firm. Facebook is about 20%.
Alphabet's capital expenditures decreased by 36% from the previous year to $ 4.6 billion. Growth was moderate compared to last quarter, as Alphabet warned in February.
Alphabet stated that its spending increases were justified, with significant expenses being allocated to offices, datacenters and artificial intelligence capabilities in line with the expected demand for its services.
Nevertheless, the company has not yet announced significant revenues from its spending in companies such as autonomous cars and its assistant artificial intelligence, Google Assistant.
The market share of newer units that are generating significant revenues is lagging behind, including Google's consolidated hardware unit and Google Cloud, which sells IT and data storage services to businesses.
And Google's costs could increase further if governments, as a whole, respond to the growing threats to limit the ability of apps to track users for advertising purposes. Other regulators have considered forcing companies to strengthen the monitoring of user content.
Alphabet shares rose 23% this year, the weakest growth of the FAANG group, with Facebook (48%), Netflix (39%), Apple (30%) and Amazon (29%).
ACCOUNTING
Alphabet's expenditures include a fine of $ 1.7 billion from the European Commission for imposing anti-competitive advertising restrictions on the websites that make use of its research.
Revenue was also boosted by a valuation change in Alphabet's stake in the carpooling application, Lyft Inc, which launched its initial public offering a month ago. Alphabet could record similar gains later this year compared to other highly regarded startups, including the transportation application Uber Technologies Inc. and the software company working Slack Technologies Inc., make their public debut.
Taking into account the fine imposed in Europe, the net profit amounts to $ 6.7 billion, or $ 9.50 per share, against an average estimate of $ 7.3 billion, according to analysts, of $ 10.48 per share. Profit excluding the fine was $ 8.3 billion, or $ 11.90 per share, exceeding analysts' estimates of $ 10.61 per share for adjusted earnings.
The operating margin excluding the fine was 23%, compared with 22% a year earlier.
(Report by Arjun Panchadar at Bengaluru and Paresh Dave in San Francisco, edited by Sriraj Kalluvila and Lisa Shumaker)
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