Google parent company, Alphabet, on Monday, reported a sharp drop in profits over the past quarter. This came as it ramped up spending for a wide array of new gadgets and services.
Profit dipped 23% from a year ago to $7.1 billion. Revenue also dropped by 20% to $40.5 billion for the California tech giant and internet search leader. Shares in Alphabet fell 1.1% in after-hours trade on the weaker-than-expected profits.
Digital advertising at Google remained the primary money-maker at Alphabet. It accounted for some $34 billion in revenue, according to the earnings report. But revenue from other sources including cloud computing climbed more than 40% to $6.4 billion.
Alphabet has been pumping money in research and development for artificial intelligence, cloud infrastructure, and launching new Pixels smartphones and other hardware.
Alphabet chief financial officer Ruth Porat said,
“We continue to invest thoughtfully in talent and infrastructure to support our growth, particularly in newer areas like Cloud and machine learning.”
The company faces antitrust reviews over its dominance of internet search on both sides of the Atlantic. It then seeks to diversify its business with more hardware and new services.
Losses on “other bets” such as delivering internet services from high-altitude balloons ballooned to $941 million in the quarter. This compared to a $727 million loss in the same period a year earlier.
Google chief Sundar Pichai said in a statement,
“I am extremely pleased with the progress we made across the board in the third quarter, from our recent advancements in search and quantum computing to our strong revenue growth driven by mobile search, YouTube and Cloud.”
The results were impacted by a one-time charge of $549 million. It is believed to be linked to a tax settlement with French authorities.
Alphabet said it set aside nearly $1.6 billion as a provision for income taxes. This is up from $891 million last year and that its effective tax rate would be 18%, double that from a year earlier.