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Google Stock Tumbles After Alphabet Reports Earnings

Google Stock Tumbles After Alphabet Reports Earnings

Alphabet Reports Earnings

Alphabet Inc. (GOOGL) tumbled in after-hours trading Thursday after the company reported earnings that beat expectations but offered cautious guidance for the current quarter.

The Mountain View, Calif.-based tech giant said it earned $9.19 billion, or $13.06 per share, on revenue of $32.66 billion in the fourth quarter. Analysts were expecting earnings of $12.53 per share on revenue of $32.17 billion, according to data from Refinitiv.

“Our core advertising business performed well again in the fourth quarter,” said Alphabet and Google CEO Sundar Pichai in a statement Thursday. “We’re focused on continuing to deliver high-quality experiences for our users, advertisers, and publishers.”

But for the first quarter of 2020, Alphabet expects revenue to be between $31.15 billion and $32.75 billion — below Wall Street’s forecast of $33.3 billion, according to Refinitiv data.

Google Stock Tumbles

Google stock tumbled after the company reported earnings that missed analyst expectations.

The internet giant reported quarterly revenue of $32.7 billion, up from $24.8 billion a year ago but below the $33.0 billion that analysts were expecting. Google’s earnings per share came in at $10.12, also below expectations of $10.49.

The miss was driven by Google’s core advertising business, which saw revenue growth of just 15% compared to a year ago. That’s down from 23% growth in the previous quarter and well below the 30% growth that analysts were expecting.

“Our ads business had another great quarter with revenues up 15% year-on-year,” said Ruth Porat, Chief Financial Officer of Alphabet and Google. “We’re focused on driving a more balanced set of results while making significant ongoing investments in new opportunities.”

Fewer Advertisers Citing ‘Political Pressures’

Alphabet Inc.’s Google faced new questions about its business from Wall Street on Thursday after less than 1 percent of advertisers said they had pulled spending because of “political pressures.”

The internet search giant reported strong fourth-quarter results, but its stock fell in after-hours trading as investors worried about a potential slowdown in ad spending growth.

In a call with analysts, Google Chief Financial Officer Ruth Porat sought to downplay concerns, saying the company has seen no change in advertiser behavior and that the vast majority of its revenue still comes from outside the United States.

But some analysts remain concerned that an ongoing public relations crisis could lead to more companies pulling back on spending with Google.

“Clearly there are some political pressures here,” said Brian Wieser, an analyst at Pivotal Research. “I think it’s a bit early to tell how big an impact this will have.”

Google’s Other Businesses and Branches Continue to Grow

Google’s other businesses and branches continue to grow despite the company’s stock tumbling after Alphabet reports earnings.

The search engine company’s shares fell more than 7 percent in after-hours trading on Thursday, even though its quarterly results topped Wall Street expectations. The drop wiped out about $60 billion of Alphabet’s market value.

The sell-off was a reminder that Google is under pressure to show investors that it can wring more revenue from its core search business and YouTube video site as growth in advertising sales slows.

Alphabet also faces regulatory scrutiny around the world and intense competition from the likes of Inc (AMZN.O) and Microsoft Corp (MSFT.O).

“The google stock is telling you that they’re doing a good job managing costs, but they need to find new sources of growth,” said Wedbush Securities analyst Michael Pachter.

Potential Effects on the Stock Market

There are a few potential effects on the stock market if Google’s stock continues to tumble. One is that other tech stocks may fall as well since Google is such a big player in the industry. This could cause a domino effect and lead to a sell-off in the sector. Another possibility is that investors may start to worry about the health of the overall stock market if one of its biggest companies is struggling. This could lead to more selling and a further decline in stock prices.

Google Still Won’t Release Some Key Metrics

Google still won’t release some key metrics, even though it reports earnings today. The company is expected to report strong results, but there are some key numbers that investors would like to see.

Google’s revenue and profit have both grown steadily for years, but the company has never provided a breakdown of its business segments. This lack of transparency has led to speculation about the profitability of its various businesses, including search, YouTube, and Android.

Investors would also like to see more details on Google’s advertising business. The Google stock company has always been tight-lipped about the specifics of its ad business, which is by far the largest source of its revenue.

Finally, Google’s cash hoard continues to grow, and investors would like to see the company put some of that money to work through share repurchases or dividends. For now, though, it looks like they’ll have to wait a little longer for more clarity on these key metrics from Google.

Why did Alphabet Stocks Tumbled?

The earnings report showed that Google’s advertising revenue growth had slowed down to its lowest level since 2015. This caused investors to worry that the company was losing its grip on the online advertising market.

In addition, Alphabet also announced that it was taking a $9.0 billion charge in connection with an antitrust fine from the European Union. This further spooked investors and caused the stock to tumble even more.

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