Google's Earnings Miss: Untangling the Quarterly Results

Video Credit: The Street
Published on October 28, 2019 - Duration: 02:02s

Google's Earnings Miss: Untangling the Quarterly Results

Tech behemoth Alphabet beat revenue estimates in the third quarter, but missed on earnings per share.

The stock was falling 1.86% to $1,265 a share in postmarket trading.

Here's how its results played out: GAAP earnings per share came in at $10.12, missing Wall Street estimates of $12.32.

Revenue was $40.5 billion, however, beating analysts estimates of $40.307 billion and growing 20% year-over-year.

Google's operating margin was 23%, lower than last year's third quarter margin of 26% and lower than analyst's expectation of 23.4%.

Google's advertising revenue grew 17% to $33.9 billion.

Cost-per-click grew 3% year-over-year, against last year's third quarter growth rate of negative 2%.

But that's not the end of the story.

"Investors were expecting a real sound beat where Google beat on every segment," said TheStreet's Tech Editor Nelson Wang.

"This time they didn't quite get that.

They [Google] beat on revenues but not on earnings.

Potentially, that was in their traffic acquisition costs." Google's TAC costs rose 6% year-over-year.

"They had an other expense related to equity investments -- it could be Slack, it could be Uber -- that was about $1.5 billion in the quarter," pointed out Zev Fima, portfolio analyst for Jim Cramer's Action Alerts Plus.

"That resulted in about $1.47 for the earnings hit." Plus, Fima noted, "Other bets," Google's segment reporting results from its moonshot bets with large potential, posted a wider loss than expected.

"The thing to remember for Alphabet... this is a long-term play," Fima said.

"A little noise quarter-to-quarter is not an issue." Save 57% during our Halloween Sale.

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