Alphabet Google earnings Q3 2018


Google-parent company Alphabet just reported its third quarter earnings. The company beat earnings expectations but missed revenue expectations. The stock sunk as much as 5.3 percent.

Here are the most important numbers:

  • Earnings per share: $13.06 versus $10.42 expected by a Refinitiv consensus estimate
  • Revenue: $33.7 billion versus $34.04 billion expected by a Refinitiv consensus estimate

Alphabet’s overall revenues were up 21 percent year-over-year.

As usual, Google’s advertising business accounted for most of its revenue, hitting $28.95 billion in the third quarter, or a 20.3 percent increase year-over-year. It separates its advertising revenue into two categories: Properties revenue — which includes ads it sells on its own site, like Google search and YouTube — and Network revenues, which includes ads on third-party sites. Network revenues hit $4.9 billion while its properties revenues were $24.05 billion.

Meanwhile, its “other revenues” category, which includes its cloud business and hardware sales and is especially important to investors looking for Google’s future beyond ads, hit $4.64 billion, up 29.24 percent year-over-year. That’s a less dramatic acceleration than last quarter’s 36.53 percent increase.

Alphabet also breaks out the revenues and losses for its longer-term “Other Bets,” like healthcare company Verily, internet service provider Fiber, and self-driving car company Waymo. Other Bets posted Q2 revenue of $146 million, up from $117 million the same quarter last year. Operating losses also grew, with the company posting losses of $727 million up from losses of $650 million the year before. On the company’s earnings call, chief financial officer Ruth Porat said that the revenues were primarily generated by Fiber and Verily.

Google’s traffic acquisition costs (TAC), which includes the money it pays to phone manufactures, like Apple, to use its services, like search, was $6.58 billion, or 23 percent of its advertising revenues. Wall Street has been watching Google’s rising TAC closely, as it’s been squeezing the company’s advertising margins, and Q3’s TAC as a percentage of ad revenues was the same as it reported last quarter.

Alphabet’s operation expenses were $11.1 billion, up 26 percent year-over-year. On the company’s earnings call, chief financial officer Ruth Porat said that that was driven primarily by R&D expenses. The company’s cash capital expenditures were $5.3 billion.

This story is developing.

Correction: A previous version of this story misstated the year-over-year percentage change of Google’s “other” revenues category.

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