Google financial results mixed, but Wall Street disappointed

The search giant fended off accusations of conservative bias from prominent Republicans, including President Donald Trump. CEO Sundar Pichai faced intense scrutiny over reports of Project Dragonfly, a secretive initiative aimed at building a censored search engine for China. And the company was criticized for its handling of data, security and privacy -- and said it's shutting down the Google+ social network -- after it was forced to disclose that a bug had exposed user information for two years.

Add one more thing to the list: Alphabet, Google's parent company, didn't pull in as much revenue as expected, according to its latest earnings report Thursday. Third-quarter profit of $9.19 billion outdid expectations -- but Wall Street saw the glass as half empty.

Alphabet tallied $33.74 billion in sales, a 21 percent increase that nevertheless missed analyst estimates of $34.05 billion for the third quarter. By comparison, Google reported 26 percent revenue growth in the second quarter.

"We're seeing a larger than expected slowdown in Google properties' revenue," eMarketer analyst Monica Peart said in a statement. People are likely more often turning directly to Amazon for product searches, she said. 

Earnings per share were $13.06. Analysts on average had expected $10.40 per share.

The company's stock fell 3.3 percent to $1,060 in after-hours trading. 

"Our revenues continued to benefit from ongoing strength in mobile search with important contributions from YouTube, cloud, and desktop search," said Ruth Porat, Alphabet's chief financial officer, on a conference call with financial analysts. Revenue was lowered by unfavorable foreign currency exchange rates, a reversal from helpful effects in the first half of the year, Porat said.

The earnings come amid a rough patch as Google grapples with repercussions from its scale and influence two decades after Sergey Brin and Larry Page founded the company. Most recently, Google has been roiled by reports about Dragonfly, eight years after initially pulling its search engine out of China. At the time of its departure, Brin, who grew up in the Soviet Union, cited the "totalitarianism" of Chinese policies.

The search service has also faced allegations of political bias. In August, Trump accused Google of having a liberal bent. He tweeted, without offering any evidence, that Google's search results are "RIGGED," saying the company is "suppressing voices of Conservatives." Google rejected the president's claim.

Google's China challenges
Google's workforce has criticized the rumored Dragonfly search project. A handful of employees reportedly quit over the initiative and about 1,000 workers signed an open letter asking the company to be transparent about the project. That includes creating an ethics review process for its efforts in China that involves rank-and-file employees, not just high-level executives.
 
Google has been mostly quiet about the project. Last month, Keith Enright, Google's chief privacy officer, confirmed during a hearing with the Senate Commerce Committee that there's indeed a Project Dragonfly, but he wouldn't elaborate.

On its conference call, Google Chief Executive Sundar Pichai also didn't add details but made it clear China is important to Google.

"We deeply care about serving Chinese users," investing for example in Android and Google Translate, Pichai said. "We are constantly looking for ways we can better serve Chinese users."
Source: https://www.cnet.com

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