Monday 3 February 2020 9:22 pm

Alphabet slides as it breaks out Youtube and Cloud revenue for the first time

Google parent Alphabet’s shares fell in extended trading after it missed fourth-quarter revenue estimates, and gave an unexpected deep-dive into its sales breakdown for the first time.

Alphabet reported overall revenue of $46.08bn for the three months to the end of December, versus analyst estimates of $46.9bn according to Refinitiv. Meanwhile it posted a profit surprise of $15.23 in earnings per share, compared to expectations of $12.53.

The figures represented Alphabet’s worst fourth-quarter revenue growth since 2015, rising 17 per cent year on year at a time when many other tech giants surpassed expectations.

The search giant broke out data regarding advertising revenue for YouTube and Google Cloud sales, reporting $4.72bn and $2.61bn in the fourth quarter respectively. Sales for other parts of YouTube such as its premium subscription service remain wrapped into Google’s other revenue segment.

Meanwhile the firm’s Other Bets division, which includes experimental endeavours such as its self-driving arm Waymo, rose to $172m up from $154m a year earlier.

The firm’s shares fell as much as five per cent in after-hours trading as investors took stock of the revelations and slowed growth. The results cap off a year in which Google faced significant headwinds in the form of domestic and international regulatory scrutiny, as well as employee resistance against US defence contracts, collaboration with China on a censored search engine and curbs on staff organising.

“Our investments in deep computer science, including artificial intelligence, ambient computing and cloud computing, provide a strong base for continued growth and new opportunities across Alphabet,” said Sundar Pichai, chief executive of both Alphabet and Google.

“I’m really pleased with our continued progress in Search and in building two of our newer growth areas — YouTube, already at $15bn in annual ad revenue, and Cloud, which is now on a $10bn revenue run rate.”

The move towards greater transparency came as part of Pichai’s first earnings report at the helm of Google’s parent firm. Founders Sergey Brin and Larry Page stepped down from the top of Alphabet earlier this year, placing the tech behemoth in Pichai’s hands though both still hold positions on the board.

“It’s always important to put these sorts of misses into perspective,” said Hargreaves Lansdown equity analyst Nicholas Hyett.

“There’s quite a lot of noise in these results. Revenue growth and operating profits are both lower than the market had hoped, but the core Google advertising businesses continue to grow strongly and a lot of the operating profit disappointment is driven by increased losses in the Other Bets division which we would expect to be volatile by its very nature.”