Google parent Alphabet reported better-than-expected fourth quarter earnings, underscored by higher ad revenue. However, investors appeared to react to some weak points in the report which sent the shares lower in the extended session.
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Operating margins, a measure of profitability, slipped to 21 percent from 24 percent due to higher fees to partner websites, as well as larger investments in self-driving subsidiary Waymo and research arm Verily. Capital expenditure also grew 64 percent to $7 billion as Google expands its cloud operations and purchases new real estate for data centers.
Still, profits at the Mountain View, California-based company were $8.9 billion in the three months through September, or $12.77 per share, higher than analysts expected. Revenue was up 21.5 percent to $39.28 billion, also better than Wall Street predictions. Ad revenue at Google grew 20 percent in the quarter to $32.6 billion.
"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," CFO Ruth Porat said in the earnings release.
Google faced scrutiny in late 2018 over alleged bias against conservatives on its signature search engine, as well as the decision to provide Android co-founder Andy Rubin $90 million in severance pay after he was fired amid sexual misconduct claims – sparking a global protest among employees.
The company also faced bipartisan criticism over reported plans to relaunch a search engine in China. Referred to internally as “Project Dragonfly,” Google was said to be preparing to introduce the censored engine in 2019 but later abandoned the plans.
When asked about it in December, CEO Sundar Pichai did not deny its existence, instead telling the House Judiciary Committee the company doesn’t “have a search product there.”
"We are committed to being fully transparent, including with policymakers, to the extent we ever develop plans to do that,” he said.
Google shut down its search engine in China in 2010 after it was hit by a cyberattack that targeted human right activists in the country.
The search giant also came under fire against allegations it did not promote President Trump's State of the Union address last year, on Monday the company confirmed to FOX Business that it will be promoting the speech.