Google costs on the rise as parent company Alphabet earnings slip

Google parent Alphabet reported thinner profit margins as the internet giant spent heavily to expand its cloud and YouTube businesses. The company’s shares slipped in late trading.

Google’s fourth-quarter capital expenditures jumped 80 per cent to $6.85 billion. The company’s operating margin, a closely watched measure of profitability, was 21 per cent, down from 24 per cent.

Alphabet is relying on its ad business to support sales and profit growth as it develops new
offerings such as cloud services and consumer hardware. The company’s higher-growth
businesses, which also include YouTube, are less profitable than the original Google desktop search service.

“Capex is growing at a sizable clip and the primary driver continues to be investing in technical infrastructure to support growth,” Alphabet chief financial officer Ruth Porat said in an interview.”By that we mean data centres and machines. This reflects our outlook for global growth in ads, search, YouTube and cloud.”

Costs were also pushed higher by hiring, mostly for the cloud business, she added during a
conference call with analysts. Alphabet had 98,771 employees at the end of 2018, up 23 per cent from a year earlier. Ms Porat said headcount growth should moderate in 2019.

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