Alphabet Inc. stock fell roughly 4% in the extended session Thursday after the company reported better-than-expected profits that handily beat Wall Street expectations but missed revenue projections.
Profits clocked in at $9.19 billion for the third quarter, or $13.06 a share, much higher than analysts’ average expectations of $10.42 a share, according to FactSet. Much like the past several quarters, a significant chunk of Alphabet GOOGL, +4.40% GOOG, +4.27% profits were related to its investments: the company said it added $1.38 billion to the bottom line because of gains in equity securities. A change in accounting standards earlier this year triggered these types of disclosures.
Overall, Alphabet reported revenue of $33.74 billion, up from $27.77 billion in the year-ago period.
“Our business continues to have strong momentum globally, led by mobile search and our many products that help billions of people every day,” Alphabet Chief Financial Officer Ruth Porat said in a statement with the earnings release.
Google produces the vast majority of Alphabet’s sales, with most of that vast pile of cash coming from Google’s advertising products. Combined, the Google unit of Alphabet reported $27.01 billion in revenue, up from $21.97 billion in the year-earlier period, after accounting for traffic-acquisition costs, or TAC, the amount of revenue that goes to other businesses to send eyeballs to Google sites and its network. Analysts expected ex-TAC sales of $27.3 billion, according to FactSet.
Google’s properties hauled in $24.05 billion, while the company’s network of non-Google sites that show its ads reported sales of $4.9 billion. Beyond disclosing what cash comes from Google’s sites — such as Google Search and Gmail — and its network, the company doesn’t break out more information. For example, analysts say that YouTube is a multibillion-dollar business, but the company does not report its actual size.
Google’s ad units haul in the lion’s share of the cash, but Google operates several non-ad businesses under the Google Other segment, which includes it cloud-computing platform, hardware sales such as the Pixel phones and Google Home speakers, as well as revenue from its Play Store. Together, those businesses reported revenue of $4.64 billion, up from $3.59 billion a year ago. Analysts on average expected those businesses to provide $4.81 billion in sales, according to FactSet.
Alphabet’s “Other Bets,” which are experimental companies that are outside of Google but within Alphabet’s corporate structure reported losses of $727 million, widening from $650 million in last year’s quarter. Other Bets sales rose to $146 million from $117 million.
Alphabet stock has gained 4.8% in the past year, while the S&P 500 SPX, +1.86% index has fallen 0.7%.
