Alphabet Inc's fourth-quarter revenue and profit beat Wall Street's expectations on Monday but sharply higher spending, as it added data centers, cloud engineers and marketed its services heavily during the holidays, anxious investors. The company's shares slipped in late trading. Refinitiv also estimated revenue at $38.93 billion compared to the actual $39.27 billion.
In turn, like many tech companies, Google made much of their services and cloud business, saying it was "one of the fastest growing businesses across Alphabet". "This reflects our outlook for global growth in ads, search, YouTube and cloud". Alphabet's Q4 earnings also came at a higher cost than expected.
The company also spent heavily on YouTube, which shares a lot of its ad revenue with content creators and larger media partners.
Asked whether Google had any plans to respond to efforts from big-game publishers to sidestep app store fees, Pichai signaled that the company had no plans to reduce the cut it takes from Google Play.
Google "other" revenues - think cloud platform and other non-advertising dosh - were $6.5bn, up 30 per cent from $5bn.
Google Cloud is focused where it seeing the most momentum: 15 countries, six main verticals and five major product areas, Pichai said.
Shares of Alphabet were down 2.8 percent after hours, trading at $1,109.50. Earlier, they closed at $1,141.42 in regular NY trading. Last year Google chose its fourth-quarter earnings call to disclose a quarterly cloud revenue run rate above $1 billion, but it has declined to update that number since that disclosure. And on Amazon, advertisers can see when someone viewing or clicking their ads makes a purchase, something Google can't do since almost all of the sales its drives ultimately happen on other sites.
Cost per click, which somewhat measures the amount Alphabet charges advertisers for each ad served on its web sites, plummeted 29 percent from 2017 and 9 percent from Q3.
Sales growth of 23 percent "is very good for what is viewed as a mature business", said Christopher Rossbach, chief investment officer of private investment office J. Stern & Co.
The company's ad business is built on the collection of intimate data about billions of people, a practice that's increasingly being scrutinized.
Earnings per share on the year were $43.70, up from $18.27 last year, but short of $45.79 analysts estimated.
Google Chief Executive Sundar Pichai told analysts the number of people shopping on Google.com each day during the holidays doubled over previous year. Together the two giants account for about 57% of all digital ad spending.