Alphabet Sales Growth Tops Forecasts, While Spending Surges

• April 23 2018
• Mark Bergen

Google’s digital advertising business generated robust growth in the first quarter, while spending surged.

Google’s digital advertising business generated robust growth in the first quarter, while spending surged.

Parent Alphabet Inc. reported first-quarter sales of $24.9 billion, excluding payments to partners that distribute Google services and ads. Analysts expected $24.3 billion, according to data compiled by Bloomberg. Alphabet shares rose less than 1 percent in after-hours trading.

The results suggest the company has so far shrugged off a privacy backlash against internet companies and their data-heavy ad targeting businesses. Google is the world’s largest digital ad provider, supported by online services that are so useful that consumers have so far continued to share their data and accept targeted ads from the company. Increased concern about privacy and the threat of new regulation may hurt this business, but it would also damage smaller rivals, perhaps more.

Alphabet gave investors several new metrics this quarter. It disclosed more details on its massive investments in private companies like Uber for the first time. The Mountain View, California-based company reported a $3 billion gain on equity securities in the first quarter. That boosted earnings by $3.40 a share. Excluding those gains, Alphabet would have made a profit of $9.93 per share.

Alphabet capital spending surged nearly threefold to $7.7 billion. That reflected a large real-estate investment and investments in Google’s cloud-computing and hardware businesses.

Another brake on earnings: Google payouts to distribution partners, known as Traffic Acquisition Costs, or TAC, which jumped 36 percent to $6.3 billion. Alphabet executives said last quarter that TAC growth would slow down after the first quarter.