Alphabet’s stock sank in after hours trading on Thursday after the Google-parent company missed Wall Street’s earnings target.
Google’s mobile search and video ads boosted revenue in the fourth quarter, but increased spending in hardware and other new businesses, as well as a larger-than-expected tax rate, weighted on the bottom line.
Alphabet stock was down about 2% at $814.80 in after-hours trading on Thursday.
Here are the key numbers from Q4:
Revenue: $26.06 billion, up 22% year-on-year and above the $25.2 billion expected by analysts
EPS (adjusted): $9.36 versus $9.67 expected by analysts
Cost of revenues: $10.66 billion (up from $8.188 billion in the year-ago quarter)
Paid clicks on Google properties: Up 43% year over year
Paid click on Google Network Members’ properties:Up 7% year over year
Cost-per-click on Google properties: -16% year over year
Cost-per-click on Google Network Members’ properties: -19% year over year
Other Bets revenues: $262 million (was $150 million in the year-ago quarter)
Other Bets operating loss: $1.088 billion (was $1.21 billion in the year-ago quarter)
“Other revenues” were up 62% year over year. That figure represents hardware, which Google has increasingly focused on with the launch of new products like the Google Pixel phone, Daydream View virtual reality headset, and Google Home voice-controlled speaker.
In addition to the hard numbers, investors had their eyes on Alphabet’s Other Bets companies — the collection of “moonshot” businesses focused on everything ffrom self-driving cars to biotech. Alphabet ended several projects and lost many top executives and leaders during the back half of 2016. The moves were designed to help cut costs from Other Bets, which have yet to generate any meaningful revenue for Alphabet.
Alphabet’s CFO, Ruth Porat, only briefly touched on Other Bets in her opening remarks during the company’s earnings call, saying she will continue to look at investments in those projects.
One Other Bet that did get some positive attention this week: Verily. On Thursday morning, Alphabet announced that Verily, which develops health technology like smart contact lenses, received a $800 million investment from a private firm based in Singapore.
During the call, Google CEO Sundar Pichai touched a lot on Google’s main new areas of investment like hardware, cloud services, and YouTube. However, Pichai wouldn’t give any hard numbers for subscribers to paid YouTube services like YouTube Red or YouTube Music, saying only it was “early days” for those products.
As for voice search, which is built into the Home speaker and other Google products and services, Pichai slightly downplayed its importance, saying voice is just one way users will interact with Google. One concern with the growth in voice search is that Google won’t be able to sell ads against it like it can with search on mobile or desktop. Pichai said he sees this problem as “more of an opportunity than a challenge.”
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