Google Profits Fall As Acquisitions Push Up Headcount Stock Down 23%
Operational cost increases is hurting Google parent Alphabet with profits falling despite a 20% rise in advertising revenue.
According to figures released after the bell in New York profits fell as the company recorded another jump in costs and cut $1.5bn from the value of its equity investments, the announcement saw the share value fall another 1%.
Currently the stock is down 23% from the prior year.
The Financial Times claims that investors have grown wary about recent cost increases, and the third quarter brought another 23 per cent jump in direct costs, pushing down the gross profit margin. General and administrative costs also jumped, rising nearly 50 per cent, to $2.6bn.
Alphabet has in the past warned that big increases in headcount, partly as a result of acquisitions was impacting their operation.
The company who is tipped to be in the market for Fitbit, has added 6,450 employees in the quarter, taking the total additions over the past 12 months to nearly 20,000 and lifting its total headcount to more than 114,000.
Despite the earnings miss, revenue growth matched most analysts’ hopes for a strong quarter on the back of a number of new advertising formats introduced in the quarter.
The net revenue performance also benefited from more moderate growth in traffic acquisitions costs, as the company passed the one-year anniversary of a new deal with Apple that had boosted the amount it paid to reach users on the iPhone. These costs rose 14 per cent, compared to the growth of more than 22 per cent seen in the first quarter of the year claims the FT.