Alphabet Inc. (NASDAQ: GOOGL) posted the first quarter financial result on Thursday after market close. Shares of Alphabet slumped 5.88% to $734.11 on Friday morning trading.
The company missed Wall Street expectation, in part because of growing losses from its long-term “bets” on blue-sky projects such as driverless cars and home automation. Both revenue and profit increased sharply compared with 2015 but still missed analysts’ estimates. Revenue was $20.26 billion which less approximately $120 million than expectation. Earnings per share was $7.50 compared with the consensus expectation of $7.96.
There was no single reason why earnings down short of expectations. Alphabet doesn’t break out its results for mobile, but digital-marketing firm Merkle Inc. said clicks on Google’s mobile-search ads more than doubled in the first quarter. In 2016, for the first time, researcher eMarketer projects that a majority of Google’s ad revenue will come from such devices.
“There’s nothing wrong with this company,” said Colin Gillis of BGC Partners. “They spent a bit more and took in a bit less than we thought, so Mr. Market is having a mood swing. But it was a fine quarter.”
During the first quarter of 2016, Alphabet spent $2.4 billion on capital expenditures which decreased 17% from last year, and less than the analysts’ expectation of $2.6 billion. Building new data centers and infrastructure for its Fiber Internet business partly drove the spending.
Recently, Alphabet faces increasing regulatory pressures. On Wednesday, European antitrust regulators filed formal charges against the company for allegedly using its dominant Android mobile operating system to benefit its search and advertising business on smartphones. The European Union is also pursuing a case against Alphabet for allegedly using its search rankings to favor its own shopping service. Alphabet has protested the allegations.