Google Parent Posts Slowed Growth Across the Board -- 2nd Update

By Rob Copeland

One of Silicon Valley's blue-chip names, Google, posted weaker earnings than expected as mounting competition to a once-untouchable online advertising operation finally landed a blow.

Google's parent, Alphabet Inc., reported first-quarter revenue of $36.3 billion, roughly $1 billion short of forecasts. Per-share earnings of $9.50 also disappointed, and were a considerable fall from a year earlier, when the conglomerate supercharged its results by marking up its stakes in private technology companies. Shares fell 7% Monday after hours on the rare miss.

The poor results are particularly ominous for Alphabet as they are an outlier in what has otherwise been a steady earnings season in the technology world. Peers like Facebook Inc. and Twitter Inc. previously posted strong earnings, while Amazon.com Inc. last week reported record profit that will allow it to pour fresh cash into improving its Prime membership program.

Growth slowed across the board for Google. Revenues were up 17% year-over-year, compared with 26% in last year's first quarter. The company's margin, a constant concern for analysts and investors, fell to 18%, compared with 25% last year.

The crimped margin can in part be blamed on last month's $1.7 billion fine from European regulators for abusing the dominance of its search engine and limiting competition.

Google, for all its myriad arms, remains essentially an old-fashioned billboard operation with a high-tech gloss, and the quarter's results highlighted the risks of that strategy. Rivals like Amazon, once content to play in their own corners of the Silicon Valley sandbox, are making big plays at online advertising.

Google's advertising revenue growth was its slowest since the third quarter of 2015.

YouTube, the video-streaming service that was an inspired acquisition 13 years ago, remains a financial black box. As is its custom, Google didn't break out YouTube in its earnings report, though expensive forays into original programming and cable-television replacement services can only be described as duds.

Analysts estimate YouTube is responsible for around 15% of Google's sales. On the quarterly earnings call, Chief Financial Officer Ruth Porat said that YouTube was an increasing cost center for the company overall.

Write to Rob Copeland at rob.copeland@wsj.com

(END) Dow Jones Newswires

April 29, 2019 17:19 ET (21:19 GMT)

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