Alphabet stock drops five per cent following report of slowest growth in three years

Google’s parent company, Alphabet, experienced a five per cent drop in its stock after the trading floor closed, following the release of its Q1 2019 earnings report. The report outlined a fiscal quarter that was much less impressive than expected, according to analysts. Alphabet’s shares had previously been flying off the shelves, with a 24 per cent stock increase this year alone.

Alphabet’s report also highlighted the $1.7bn (€1.5bn) fine the company had to pay to the European Commission (EC) for infringing on European competition law, which took a toll on most numbers. Including the fine (GAAP), Alphabets quarterly revenue increased by only 17 per cent year-over-year, totaling $36.34bn (£28.07 billion), versus the estimated $37.33bn. Meanwhile, EPS was reported at $9.50, compared to the $10.10 predicted by analysts.

Traffic acquisition costs (TAC) totaled $6.86bn, compared to the expected $7.26bn, according to FactSet. Q1 2019’s TAC accounted for 22 per cent of Alphabet’s advertising revenue, a drop from last year’s 24 per cent.

Paid clicks on Google properties only increased by 39 per cent since Q1 2018, showing that Google is having a hard time bringing traffic to its properties, regardless of lowered advertising costs. This is the lowest growth Alphabet has experienced, considering Q4 2018 saw a 66 per cent growth and Q3 2018 saw a 62 per cent growth.

“We delivered robust growth led by mobile search, YouTube, and Cloud with Alphabet revenues of $36.3bn, up 17 per cent versus last year, or 19 per cent on a constant currency basis,” said Ruth Porat, chief financial officer of Alphabet and Google. “We remain focused on, and excited by, the significant growth opportunities across our businesses.”