Google continued to plow the profits from its search advertising business into cloud computing capacity and headcount during the fourth quarter of 2018, as its cloud business enters a new era under a new leader.
"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 with Bloomberg TV.
Alphabet's operating margin fell to 21% for the quarter - a noteworthy dip from 24% a year ago. Alphabet's quarterly earnings call just started, and we'll be listening for more details on the successes Google found in its hardware and services business as well as what drove the losses for other bets. Alphabet had 98,771 employees at the end of 2018, up 23 percent from a year earlier.
On a per-share basis, the Mountain View, California-based company said it had profit of $12.77.
Of that figure, Google's advertising revenues represented the company's greatest source of income, totalling approximately $32.64 billion United States dollars (roughly $42.83 billion CAD) in Q4 2018.
All this even as Alphabet released mostly upbeat news yesterday about its Q4 results, beating analysts' forecasts in key metrics in many instances.
Facebook Inc's better-then-expected fourth-quarter results last week had lifted expectations for Alphabet as they suggested that concerns about a global economic slowdown may be overblown. Alphabet's profits were thinner because of its investment in cloud services.
However, the company's bet on Google-made hardware also comes with significant expenses: Google spent close to $1.5 billion acquisitions in 2018, up from $287 million in 2017. Advertising directors speaking to CNBC have said some brands were moving 50 to 60 percent of their ad spending from Google to Amazon.
Other businesses, such as health venture Verily and self-driving start-up Waymo, were more disappointing at $154 million in revenue.
Alphabet's stock price dropped roughly three per cent despite the beat in after-market trading Monday.
Google more than doubled the number of Cloud Platform deals over $1 million, as well as the number of multiyear contracts signed, Pichai said.
Pichai highlighted YouTube as one of the company's success stories, saying the number of YouTube channels with more than 1 million subscribers almost doubled in 2018. Among the more damaging of those was its work on a China-specific search engine which ultimately caused questions to be raised by the U.S. government.
Porat said a big spending increase was in hiring and compensation of workers, particularly engineers and product managers.