Google Parent Alphabet's Ad Sales Hit Record, but Costs Pile Up--2nd Update

By Rob Copeland 

Google showed the complications of operating an internet empire, as steady growth for online advertising sales in the third quarter was outweighed by rising costs and poor results for some long-held company investments.

The search-engine giant's parent, Alphabet Inc., reported revenue of $40.5 billion, a rise of 20% over the same period last year. While that would be enviable growth for many other companies, the clip is modestly below Google's long-term track record.

Alphabet's profit for the third quarter -- $7.1 billion -- was lower than Wall Street's expectations and down 23% from a year earlier, when it was boosted by changes to the U.S. tax code. The company's margin was also crimped as costs rose, a long-term concern for investors.

However, strong results could create a tricky situation for the company as it faces regulatory scrutiny. Even as ad revenue rose 17% to $33.9 billion, analysts and investors are encouraging the company to move forward on new advertising opportunities in units like video platform YouTube and the ubiquitous Google Maps app.

Yet such efforts to create new profits across the conglomerate are likely to further fuel regulators' concerns about competition.

The Trump administration and 50 attorneys general have opened wide-ranging probes into Google, including whether it has an unfair advantage over smaller advertising rivals.

The Justice Department's antitrust chief, Makam Delrahim, said last week that a breakup of Silicon Valley's tech giants is "perfectly on the table" as part of evaluations of whether such firms abuse their market power.

Alphabet's stock fell 1% after hours. Shares have gained roughly 25% this year, in line with the broader technology market.

Advertising is central to the Google narrative, constituting the majority of the company's revenue -- and because the company is scant with disclosures on other areas of its business. Alphabet has resisted requests from analysts to detail the performance of YouTube, for instance, and combines results from units like the Waymo self-driving car division, hardware and cloud computing in a line item that Google simply calls "Other Bets."

Write to Rob Copeland at [e-mail]

(END) Dow Jones Newswires

October 28, 2019 17:55 ET (21:55 GMT)

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