Alphabet stock falls despite profits in last quarter

Alphabet, the parent company of the internet search giant Google, earned $39.27bn in the last three months of 2018, but its share price sank as its costs rose.

Alphabet’s revenues for the quarter were 22% higher than the same period last year and the company made a profit of $8.9bn, the company announced on Monday. Revenues in the US rose 20% while revenues from Europe, the Middle East, and Africa rose 29%, helped by the strength of the euro and the pound.

It was the latest tech company to announce strong revenue growth – news that has cheered investors.

But the cost per click on Google properties which roughly measures the amount Alphabet charges advertisers for each ad served on its websites dropped 29 percent from last year and 9 percent from last quarter, which might be alarming investors concerned that Google’s pricing power for ads is eroding.

Alphabet-owned Google is facing new pressure in digital advertising from Amazon’s rising presence in the market and seeing heightened pricing pressure, at the same time its costs of doing business are rising.

The fees that Alphabet pays to companies like Apple for Google to be their default search engine rose to $7.4bn up from $6.6bn for the same period last year.

Alphabet’s shares sank 3% in after-hours trading.

Google properties account for nearly all of the company’s revenues – $39.1bn in the last quarter. Revenues from its cloud business, hardware sales, and Play, its music, and media service were $6.4bn.

Before the results were released the company’s share price had rallied after stumbling along with its peers last year.

Last week Amazon reported its third record profit in a row, making over $3bn in the last three months of the year.

Amazon and Alphabet are increasingly competing for advertising dollars and in cloud computing.

On Monday Apple briefly became the world’s most valuable company once again as investors continued to absorb its better than expected results from last week.