Google-parent Alphabet Sees Quarterly Profit Slip

Shares in Google's parent company Alphabet sank Tuesday after the internet giant reported that earnings in the recently ended quarter missed market expectations, with profit down from a year earlier.

Alphabet reported net income of $16.4 billion in the first quarter on revenue that climbed 23 percent to $68 billion when compared to the same period last year. Alphabet profit was $17.9 billion in the first quarter of 2021.

Shares sank nearly five percent to $2,257 on the news.

The quarter brought strong growth in Alphabet's search and cloud computing businesses while the company continued to invest heavily in products and services, chief executive Sundar Pichai said in an earnings release.

While Alphabet saw revenue from online ads climb to more than $46 billion, the cost of acquiring online "traffic" that helps fuel that income was up some $2 billion from the same period a year ago, the earnings report showed.

Alphabet's ranks of employees grew to just shy of 164,000 people from 140,000 people in the same quarter last year.

The Silicon Valley titan also continued to pour money into data centers and parts of its operations that power its cloud computing services.

"We are pleased with Q1 revenue growth of 23% year over year," said Alphabet chief financial officer Ruth Porat.

"We continue to make considered investments in Capex, (research and development) and talent to support long-term value creation for all stakeholders."

Insider Intelligence principal analyst Paul Verna told AFP that while Google's search business remained a "bright spot" at the company, earnings at video-sharing website YouTube were "a big miss."

"TikTok has become a significant competitive threat," Verna said of the pressure on YouTube.

"On the connected television side, there is a lot of competition from other platforms that have entered the space."

Alphabet is also dealing with challenges facing the broader market, such as inflation that has advertisers more carefully minding marketing budgets, Verna said.

The tech firm is also dealing with "natural consequences" of coming out of a pandemic that boosted online activity to degrees not truly sustainable, the analyst added.

"In that light. I don't think today's results are disastrous by any means," Verna said.

Alphabet remains a market leader in search and strong in video, he said, "but there's just a saturation limit to growth."

Meanwhile, Alphabet put out word Tuesday that it was adding labels to apps available at its Play Store to let users of Android-powered mobile devices see what kinds of data is collected about their activities.

"Users want to know for what purpose their data is being collected and whether the developer is sharing user data with third parties," Android privacy product vice president Suzanne Frey said in a blog post.

"That's why we designed the Data safety section to allow developers to clearly mark what data is being collected and for what purpose it's being used."

Google last week announced it was starting to roll out an option for European users to reject "cookies" with a single click, months after it was slapped with a massive fine.

Google, along with Facebook, has faced an onslaught of legal cases and punishments over its use of web-tracking technology, which breaches EU privacy legislation.

Cookies are packets of data installed on a user's computer that allow browsers to save information about their session.

"We have completely overhauled our approach, including changing the infrastructure we use to manage cookies," the US giant wrote in a blog post.

Google committed to changing its practices after French data watchdog CNIL slapped it with a 150-million-euro ($162 million) fine in January.