Google-parent Alphabet misses first-quarter revenue estimates

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Google's parent company Alphabet has reported a drop in profits as it missed growth forecasts and felt the effects of an European Union fine, causing shares to dip.

Google's advertising revenue rose by 15% to $30.72 billion, a sharp slowdown from 24% growth a year ago, according to its earnings report for the first quarter of 2018.

Michael Nathanson of analysts MoffettNathanson said that, as was the case with Facebook, Google's slower growth could be a blip rather than "some early flashing red light" that would force "conventional wisdom to be rethought".

The company said it would have met expectations, adjusting for currency fluctuations.

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Hardware sales also slowed during the quarter for the Pixel phone, Google chief financial officer Ruth Porat said on Monday's call, reflecting a broader industry slowdown in smartphone sales.

Sales growth slowed to 17% in the period, below the rate of expansion in the previous quarter and down from a 26% increase in the same period past year.

Traffic acquisition costs (TAC): $US6.86 billion, or 22% of advertising revenue, compared with 24% of advertising revenue during a year ago.

Alphabet said paid clicks fell 9 per cent compared with the previous quarter.

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Still, the company has yet to tout significant revenue from its spending on ventures such as self-driving cars and its AI helper Google Assistant.

"Google Cloud Platform remains one of the fastest growing businesses in Alphabet with strong customer momentum reflected in particular in demand for our compute and data analytics products", Porat said in a call with analysts. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). Its "other revenues" operations, which includes Google's hardware business (phones, speakers, laptops, etc.) and its cloud services business, delivered $5.45 billion in revenue, a 25% uptick from past year.

The latest quarter results included a US$1.7 billion fine by the European Commission for having placed anticompetitive advertising restrictions on websites using its search widgets. Facebook is expected to follow with a 20.2 per cent share of that pie. The company's shares rose 3.49% after Warren Buffett's Berkshire Hathaway Inc put $10 billion behind Occidental Petroleum Corp's bid for smaller rival Anadarko Petroleum Corp as it tries to see off competition from Chevron.

"Other bets" showed an operating loss of $858 million, up from $571 million a year ago while revenues rose modestly to $170 million.

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