Alphabet, the parent company of Google, reported quarterly earnings beating Wall Street expectations. However, itsshares slipped, with investors apparently focused on rising costs at the technology giant. Alphabet reported a profit of USD 8.9 billion in the fourth quarter on revenue that was up 22 per cent to USD 39.3 billion from the same period a year earlier.
Alphabet chief financial officer Ruth Porat said, "With great opportunities ahead, we continue to make focused investments in the talent and infrastructure needed to bring exceptional products and experiences to our users, advertisers and partners around the globe."
Expenses rose to USD 31 billion compared with USD 24.6 billion in the same period a year ago. Alphabet shares were down 3.3 per cent to USD 1,103.50 in after-market trades that followed release of the earnings figures from the final three months of last year. According to independent Silicon Valley analyst Rob Enderle, "You do have to watch them in regard to costs, because their costs can drift out of line."
Noting Google's dominance of the digital ad market, he added: "It's like they've got the goose that lays the golden eggs and their job is to spend the money." Google commands a lion's share of the global digital advertising market, especially when it is linked to online searches, but lifestyles have shifted to smartphones and tablets where it makes less money per ad.
And, while video-sharing platform YouTube contributed strongly to revenue, the amount of money spent on content for its ad-supported and subscription offerings grew, according to Porat.
Porat said a big spending increase was in hiring and compensation of workers, particularly engineers and product managers. Alphabet's head count grew to nearly 99,000 from 80,000 employees during the course of the year.
Google chief executive Sundar Pichai said on an earnings call: "Providing accurate and trusted information at the scale the Internet has reached is an extremely complex challenge and one that is constantly getting harder," He added: "We feel a deep sense of responsibility to do the right thing and are continuing to build privacy and security into the core of our products keeping users data safe and secure with the industry's best security systems and giving people better and clearer controls."