By Todd Horwitz 

Google Profit Drops

Quarterly results from Google showed the complexity of operating its internet empire, as steady growth in online advertising sales was overshadowed by rising costs and a weak performance from some long-held company investments. The mixed outcome for the third quarter adds to a tricky dance Google must execute as it faces regulatory scrutiny.

Analysts and investors are encouraging the company to plow ahead on new advertising opportunities in units like video platform YouTube and the ubiquitous Google Maps app. Yet such efforts to create new profits across the conglomerate come as the Trump administration and 50 attorneys general undertake wide probes into Google, including whether it has an unfair advantage over smaller advertising rivals.

For the last few years, Google has worked to reduce its reliance on advertising dollars. It has invested in wooing corporate customers to its cloud computing services, branched into hardware with new smartphones, smart speakers and computers, and has continued to plow money into so-called moonshot investments like self-driving cars and cellular connectivity from hot-air balloons.

To build out these new businesses, Google is spending heavily to hire employees, invest in data centers and pay for marketing of new products like its Pixel smartphones. Those investments have not yet paid off. Google Cloud is growing rapidly, but remains behind Amazon and Microsoft and it is unclear whether the business is profitable. Google’s smartphones are an afterthought to Apple and Samsung. The most notable financial gains from Alphabet’s moonshot investments — which it calls “Other Bets” — are that they aren’t burning as much money as before.

Google’s parent, Alphabet Inc., reported third-quarter revenue of $40.5 billion, a rise of 20% from the same period last year. While that would be enviable growth for many companies, the clip is below Google’s pace historically.

Advertising revenue rose to a record $33.9 billion, contributing to an overall profit of $7.1 billion. That profit was lower than Wall Street’s expectations and down 23% from a year earlier, when the result was boosted by changes to the U.S. tax code. The company’s margin for the latest period was also crimped as costs rose, a long-term concern for investors.

Google said the latest quarter was another busy time for adding “Nooglers,” or New Googlers. It hired 6,450 full-timers, swelling that head count to 114,096. Alphabet’s stock fell 2% after hours, wiping out gains from Monday’s regular session, when it rose to $1,290. Shares have gained roughly 25% this year, in line with the broader technology market.

Todd “Bubba” Horwitz