The internet giant's lucrative advertising business is showing some concerns. Plus, there are regulatory issues and currency fluctuations to contend with.Sohini Mitter
Google has had a tough first quarter in 2019.
Its parent company Alphabet reported revenues of $36.3 billion for Q1, missing analyst estimates by over a $1 billion. Not only that, its revenue growth - 17 percent year-on-year - has been the slowest since 2015. Last year, Alphabet had grown its revenues by 26 percent this quarter.
Even though revenues climbed, quarterly profits dipped a significant 29 percent to $6.7 billion. The sluggish growth is a direct result of declining ad sales as Google faces competition from other quarters, namely Facebook and Amazon.
Quarterly growth was further impacted by the hefty anti-trust fine of $1.7 billion, which Alphabet had to pay the European Commission.
Shares tanked 7.3 percent following the earnings announcement, eroding more than $60 billion off Alphabet’s market cap.
Google's Chief Financial Officer Ruth Porat, however, played the performance down, saying "robust growth" in the quarter was led by mobile search, YouTube ad revenues, and the cloud computing business.
"We remain focused on, and excited by, the significant growth opportunities across our businesses," she said.
She singled out Google's cloud business, stating that the company would continue to invest heavily in data centres and the tech workforce. Ruth said,
"Google Cloud Platform remains one of the fastest growing businesses in Alphabet with strong customer momentum reflected in particular in demand for our compute and data analytics products.
Investments in digital content offerings through YouTube would also go up.
As for its hardware business, which includes Pixel smartphones and Google Home smart speakers, the company is battling slow sales owing to increased competition, especially in the handset market.
Porat said in the analyst call,
"Hardware results reflect lower year-on-year sales of Pixel, reflecting in part heavy promotional activity industrywide given some of the recent pressures in the premium smartphone market."
Google CEO Sundar Pichai, however, is bullish about Google Home, which he called a "market leader”.
“We really see this as incredibly important to drive the future of computing forward, and to make sure our services are presented to users, in the way that we intended them to be," he said.
Interestingly, Google's 'Other Bets' unit, which includes self-driving car business Waymo, incurred losses of $858 million, widening over 50 percent from $571 million a year ago. The division reported revenues of only $170 million.
The company cautioned investors of a further slowdown in growth during the second quarter on account of currency fluctuations.