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Why Alphabet’s Revenue Growth Slowed in Q3 2018

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Alphabet missed revenue estimates, profits surged

Alphabet (GOOGL) rose 4.4% in regular trading hours on October 25, but it fell 5% in after-hours trading after it reported underwhelming revenue for the third quarter.

Alphabet’s gross revenue climbed 21% from the same quarter last year to $33.74 billion, but it missed analysts’ estimate of $34.05 billion. This also represented a meaningful slowdown from previous quarters.

The search giant said that its net income had surged 37% YoY (year-over-year) in the third quarter to reach $9.19 billion. However, the company’s net income was bloated by gains in equity securities.

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Google’s ad business is losing market share to Amazon’s

The slowdown in revenue growth signals a clouded outlook in Alphabet’s core business, which is beginning to face stiff competition from Amazon (AMZN) amid growing scrutiny from regulators. A good chunk of product searches now take place on Amazon’s platform.

Google’s non-ad businesses are gaining traction, though. Its Other revenue, which includes revenue generated from its cloud-computing and hardware products, jumped 29% to $4.6 billion in the quarter.

Alphabet’s Other Bets, which include Waymo, its venture into the autonomous vehicle space, generated revenue of $146 million during the third quarter. However, the segment’s operating loss during the period was $727 million.

Alphabet’s capex during the third quarter was $5.2 billion, a 49% YoY jump, as the company spent on hiring more employees and technologies that are still in the nascent stages of development.

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