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Shares of Google’s Parent Fall On Weak Profits

January 26, 2017

Fortune Global Forum 2015Fortune Global Forum 2015
Alphabet CEO Larry PagePhotograph by Stuart Isett — Fortune Global Forum

Google parent Alphabet posted fourth-quarter profit below analysts’ estimates on Thursday, sending its shares down more than 2.7% in extended trading.

The company, however, posted a stronger-than-expected 22.2% increase in quarterly revenue as advertisers spent more to reach an expanding user base that spends ever more time on smartphones and on YouTube.

Google’s ad revenue, which accounts for the bulk of its business, rose 17.4% to $22.40 billion in the fourth quarter.

Research firm eMarketer has estimated that Google will capture $60.92 billion in search ad revenue this year, or 58.8% of the search ad market worldwide.

Paid clicks, or clicks on Google ads, rose 36%, compared with a 33% increase in the third quarter. Paid clicks are those ads on which an advertiser pays only if a user clicks on them.

Analysts on average had expected a rise of 26.9%, according to FactSet StreetAccount.

Alphabet’s Other Bets revenue increased to $262 million from $150 million a year earlier, while operating loss of $1.09 billion narrowed from $1.21 billion.

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Other Bets includes broadband business Google Fiber, home automation products Nest, self-driving technology company Waymo as well as X, the company’s research facility that works on “moon shot” ventures.

Alphabet’s net income rose to $5.33 billion, or $7.56 per Class A and B share and Class C capital stock, in the fourth quarter, from $4.92 billion, or $7.06 per share, a year earlier.

Excluding items, the company earned $9.36 per share, below the average estimate of $9.64 per share, according to Thomson Reuters I/B/E/S.

The company’s consolidated revenue rose to $26.06 billion above the average estimate of $25.26 billion.