Alphabet profits fall more than expected as costs rise
Google's parent company Alphabet fell short of quarterly profit forecasts in the three months leading to 31 December as growth seen in its advertising department was offset by heightened promotional spending on the likes of YouTube and its cloud computing services.
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Although demand for advertising space on Google's mobile applications ensured the Californian firm's dominance in the internet advertising space was solidified, aggressive moves to maintain its current growth rate saw expenses jump 27% to $24.7bn in its fourth trading quarter.
Google bought ads during several major North American sporting events, such as Sunday's SuperBowl LII, in order to market its new Pixel 2 smartphone and YouTube television service.
Sales in the fourth quarter increased 24% to $32.3bn, beating analyst expectations of $31.9bn, however the increased spending resulting in an adjusted profit of $6.8bn, or $9.70 per share, which came in just shy of estimates of $7bn, or $10 per share.
Alphabet reported a large one-time expense of $9.9bn as a result of December's amendments to the US tax code.
Alphabet generated $110.9bn in revenue over the full trading year, up 23% from the previous year, marking the first time the group had topped $100bn.
Profit fell 35% to $12.6bn because of the tax bill and a separate charge of $2.7bn related to a European Union antitrust fine, which the company was appealing.
"Our excellent results represent a terrific start to 2017, with revenues up 22% versus the first quarter of 2016 and 24% on a constant currency basis," said Ruth Porat, Alphabet chief financial officer.
"We clearly continue to benefit from our ongoing investments in product innovation and have great momentum in our new businesses across Alphabet," Porat added.
As of 1020 GMT, shares had lost 3.76% in pre-market trading to $1,137.15 each.