Alphabet misses on earnings, tops sales forecast

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If you care about money, the economy and corporate America, earnings season matters. USA TODAY’S Matt Krantz breaks it down. USA TODAY

SAN FRANCISCO — Google parent Alphabet revenue soared 22%, topping analyst estimates, on strength in mobile search and video advertising and growth in newer business lines such as cloud computing and hardware.

But that growth came at a price. The Internet giant missed on earnings, which were weighed down by heavy spending on these aggressive pushes into new businesses and a one-time tax charge.

Shares fell about 2% in extended trading.

Alphabet reported fourth-quarter revenue of $26 billion,above analyst estimates of $25.18 billion. Revenue, excluding payments to advertising partners partners, was $21.22 billion.

Net income was $5.33 billion, or $7.56 a share. Excluding certain expenses, Alphabet said it would have earned $9.36 a share, missing analyst estimates of $9.61 a share.

Google has been investing heavily in new business lines such as Google Play, cloud computing and hardware businesses. That segment grew 62% to $3.4 billion, likely propelled by growth in cloud computing and sales of Google's new Pixel smartphones and home speaker, Google Home, which launched in October.

Other Bets, Alphabet's more speculative ventures such as self-driving car company Waymo and connected device maker Nest, saw revenue increase 75% to $262 million, while operating losses narrowed 10% to $1.09 billion.

Cost of revenues rose to $10.66 billion from  $8.19 billion a year ago.

Increased spending put a crimp in Alphabet's bottom line. So did an increase in the tax rate. Alphabet reported a 22% rate in the fourth quarter, up from a 5% rate a year ago.

Analysts shrugged off the bottom-line miss.

"Profitability was impacted by taxes, but operating margins were sound," said Pivotal Research analyst Brian Wieser.

For a company of Alphabet's size to increase revenue by 22%, "that's pretty tremendous," said CFRA analyst Scott Kessler. As for the miss, "because it's a company that doesn't provide guidance, investors have tended to be more forgiving of Alphabet when it reports results," Kessler said.