Google parent company reports bumper profits, but shares fall 3%

(c) Sky News 2019: <a href="">Google parent company reports bumper profits, but shares fall 3%</a>

Shares (Berlin: DI6.BE - news) in Alphabet (Xetra: ABEA.DE - news) , Google's parent company, fell 3% in after-hours trading despite the company reporting bumper profits - as it ramped up spending on projects such as cloud computing and self-driving cars.

Profits for 2018 more than doubled from $12.7bn (£9.7bn) to $30.7bn (£23.5bn) while for the fourth quarter alone they reached $8.9bn (£6.8bn), compared with a loss of $3bn (£2.3bn) in the same period last year.

The figures beat Wall Street estimates but a 26% surge in costs and expenses to $31.1bn (£23.8bn) for the final quarter - and a fall in profit margins - appeared to trouble investors.

Spending was pushed higher by Google boosting staff in its cloud computing division, promoting YouTube subscription packages, and buying office buildings in Silicon Valley and New York.

Alphabet's "Other Bets" business - which includes self-driving car company Waymo and health-tech venture Verily - saw quarterly revenues rise 18% to $154m (£118m), though operating losses ballooned by 78% to $1.3bn (£1bn).

Overall, Alphabet's revenues were up 22% to $39.3bn (£30.1bn) for the fourth quarter and 23% to $136.8bn (£104.9bn) for the full year.

Google chief executive Sundar Pichai said the number of people shopping on each day during the run-up to Christmas doubled over last year.

George Salmon, equity analyst at Hargreaves Lansdown (Frankfurt: DMB.F - news) , said: "While the core business is still growing impressively, the significant spending shows growth isn't quite as capital light as had been hoped."

Jasper Lawler, head of research at London Capital Group, said: "The increase in spending at Alphabet reduces profit margins and comes as the firm moves away from digital advertising towards more costlier businesses such as cloud computing and self-driving cars.

"When spending growth outpaces revenue growth investors will always get anxious."