Growth in Google’s advertising business slowed more than expected in the latest quarter, sending the shares in parent company Alphabet down by almost 5 per cent in after market trading on Thursday.
While some deceleration had been expected, the slowdown of revenue growth to 21 per cent, from 26 per cent in the second quarter, was two percentage points more severe than most analysts had anticipated. Alphabet said currency swings wiped one percentage point from its growth.
Google, which accounts for all but half a per cent of Alphabet’s revenue, has been on a growth spurt in recent quarters, and its revenue gains were expected to moderate as it faced more difficult comparisons with previous strong quarters.
Alphabet also reported another outsized jump in costs and capital spending, continuing an investment binge that has left some investors wary. Its total costs rose by 27 per cent, outpacing revenue growth, while capital spending jumped by 49 per cent, to $5.28bn.
Despite that, a lower tax rate and an accounting change helped the company easily beat Wall Street’s earnings forecasts for the third quarter. Alphabet reported earnings per share of $13.06, up from $9.57 a year before and ahead of the $10.40 most analysts had been expecting. A new accounting rule for equity investments added $1.20 to EPS, while the tax rate fell to 9 per cent, from 16 per cent the year before.
Get alerts on Alphabet Inc when a new story is published