Alphabet falls on Increased Expenses

Google’s parent company Alphabet Inc. (NASDAQ: GOOGL)reported is first quarter financial results and surpassed all estimates. Shares popped 3 percent during Monday’s after-market hours, but quickly fell to the closing value.

Google shares opened 2.53 percent lower shortly after the opening bell on Tuesday.

For the first quarter, Google reported revenue of $31.15 billion, growing 26 percent year over year and topping Thomson Reuters’ estimates of $30.29 billion. The company reported an EPS of $9.93, beating Thomson Reuters’ estimates of $9.28.

Google’s advertising revenue accounted for majority of the revenue as usual, drawing in $26.64 billion in the quarter, higher than $21.41 billion the same quarter last year.

Properties revenue, such as Google’s Youtube business, reported revenue of $21.99 billion. Google’s “other revenues,” like its cloud segment, reported revenue of $4.35 billion.

Google reported operating income of $7.0 billion, increasing 22 percent year over year. Although income gained, the company’s total costs and expenses rose to $24.15 billion from $18.18 billion the previous year’s same quarter.

Total traffic acquisition costs (TAC) increased to $6.3 billion from $4.63 billion the previous year. Google’s Chief Financial Officer Ruth Porat said that increase is due to mobile search and programmatic advertising having higher TAC. Porat told CNBC that TAC will begin to slow down in the second quarter.

Paid clicks on Google properties increased to 59 percent, from 8 percent the previous year, while costs per click fell to by more than double to 19 percent.

Due to a new account standard, Google had to change the way companies account for equity security investments. As a result, the company had to report all gains, realized and unrealized, but the company did benefit from a lowered tax rate of 11 percent compared to 20 percent last year.

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