December 2, 2021

Alphabet stock slips despite revenue increase of 23% in 2018

Google’s parent company Alphabet has reported what on the surface appear to be positive financial results for 2018, yet stocks in the company still fell 3% in after-hours trading. An operating margin 3% lower than the 24% posted in Q4 2017 and higher expenditure are considered to be reasons for the drop-off, but Alphabet remains profitable.

In its published results, the Mountain View firm pointed to full-year revenue of $136.8 billion, up 23% year-on-year, with fourth-quarter earnings of 39.3 billion beating the same period in 2017 by 22%. However, lower-than-expected operating income of $8.2 billion and capital expenditure of $25.4 billion — double the spend from Q4 2017 — are said to be troubling investors.

Higher traffic acquisition (TAC) costs are also a potentially damaging factor, but as a percentage of total revenue, the 23% figure is actually lower than in the fourth quarter of 2017. Earnings per share (EPS) came in at $12.77, showing stronger profits than most analysts predicted and proving that despite the stock price fall, it’s not all bad news.

Alphabet CFO Ruth Porat has stated that the company’s rate of growth will slow further, but continued investment in shoring up its flagship products is expected to stand Google and its other interests in good stead.

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