Google-parent Alphabet reported on Tuesday first-quarter revenue that beat analysts' forecasts, but earnings fell short amid slowing growth in its core advertising business and higher customer acquisition costs.
Alphabet rose more than 2% in after-hours trade.
Alphabet A (NASDAQ:GOOGL) announced earnings per share of $9.87 on revenue of $41.16 billion. Analysts polled by anticipated EPS of $10.71 on revenue of $40.99 billion. That compared with EPS of $9.50 on revenue of $36.34 billion in the same period a year before. Alphabet had reported EPS of $15.35 on revenue of $46.08 billion in the previous quarter.
The company’s core advertising business grew 10.4% to $33.8 billion, slower than the 16% growth from last year’s fourth quarter.
YouTube ads generated $4.038 billion in revenue in the first quarter, compared with $3.025 billion a year earlier.
"Performance was strong during the first two months of the quarter, but then in March we experienced a significant slowdown in ad revenues," said Ruth Porat, chief financial officer of Alphabet and Google.
Total acquisition costs rose to $7,452 billion from $6,860 billion a year earlier.
Cost per click on Google properties -- the amount Alphabet charges advertisers for each ad placed on its web sites -- grew 18% from last quarter, underpinning hopes that Google’s pricing power for ads has steadied, following a wobble last year.
"Alphabet’s beat on sales shows that while ad revenues are under pressure, other parts of the business, led by the cloud computing segment, are helping to mitigate the negative impact coming from the Covid-19 pandemic," analyst Haris Anwar said. "But that doesn’t mean that the company is out of the woods. The real slowdown in sales is likely to come in 2Q when the giant will face the full impact of this financial and health crisis."
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