Google Parent Alphabet Beats Q3 Revenue Estimates, But Profit Miss Hits Shares

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Google parent Alphabet saw its shares slide more than 1% in after-hours trading following the release of the tech giant’s third-quarter financial results.

While the company exceeded Wall Street analysts’ estimates for total revenue, with $40.5 billion, earnings per share of $10.16 fell well short of the consensus forecast for $12.46. The earnings also dropped by 23%, reflecting rising expenses.

Alphabet shares, which finished the regular trading day at $1,290, declined to about $1,273.75, but initially the damage was a bit worse as investors processed the numbers.

There were several reasons for the profit miss, including investigations by various branches of government, including the U.S. Congress and the Federal Trade Commission. Also, attorneys general in 48 states have launched a probe of the company’s allegedly anti-competitive behavior.

Regulatory agencies and government officials also have been looking closely at other dominant tech players, including Facebook and Amazon. Together with Facebook, Google controls about 80% of the total online advertising marketplace.

Google has sought to reassure the public and investors, noting its co-operation with the probes and also its ability to navigate through previous regulatory scrutiny.

Revenue, which mostly comes from advertising, jumped 20% from the same quarter a year ago. Analysts had expected revenue of $40.3 billion.

CEO Sundar Pichai cited growth at YouTube as well as in mobile search and cloud computing as key drivers of overall results. CFO Ruth Porat said the company is investing “thoughtfully in talent and infrastructure to support our growth,” noting emerging areas like machine learning and Cloud.”

In a conference call with investors, Pichai noted stepped-up safety efforts at YouTube, which has become a top priority in the wake of inappropriate material surfacing on the video platform, to the distress of users and advertisers.

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