Alphabet Shares Sag and It’s Not All About Taxes

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Alphabet Inc. (NASDAQ: GOOGL) reported fourth-quarter and full-year 2017 results after markets closed Thursday. The search engine behemoth reported diluted earnings per share (EPS) of $9.70 on revenues of $32.32 billion. In the year-ago quarter Alphabet posted EPS of $9.36 on revenues of $26.06 billion. Analysts were estimating EPS of $9.98 on revenues of $31.87 billion.

For the full year, Alphabet reported revenues of $110.86 billion and EPS of $18.00 compared with 2016 revenues of $90.27 billion and EPS of $27.85. Analysts were looking for revenues of $110.4 billion and EPS of $32.31.

The Google segment posted fourth-quarter revenues of $31.91 billion, up from $25.8 billion a year ago. Operating income rose from $7.88 billion to $8.76 billion. The operating loss on other (Bets) revenues totaled $916 million, down from $1.09 billion in the year-ago quarter.

Net loss for the quarter totaled $3.02 billion compared with net income of $5.33 billion in the year-ago quarter. The company took a charge of $9.9 billion primarily to cover the one-time expense of repatriation and adjusted deferred tax valuations.

Revenues at Google websites rose from $17.97 billion to $22.24 billion and Google Network revenues rose from $4.43 billion  to $4.99 billion. Ad revenues rose from $22.4 billion to $27.23 billion.

Traffic acquisition costs paid to Google Network members rose by four percentage points to 74% of Network revenues, or $3.67 billion. Payments to distribution partners totaled $2.78 billion, about 24% of websites revenues. Total traffic acquisition costs rose from $4.85 billion to $6.45  billion.

Paid clicks on Google websites were up 48% year over year and up 18% sequentially. Paid clicks on the Network members sites were up 130% year over year and 9% sequentially. Aggregate cost per click fell 14% compared with the year ago quarter and was down 6% sequentially.

Alphabet did not provide a forecast, but the consensus second-quarter estimates call for EPS of $9.30 on revenues of $29.76 billion. For the full year analysts forecast EPS of $41.68 on revenues of $131.46 billion.

Shares traded down nearly 4% at $1136.01 in after-hours trading Thursday. The 52-week range is $812.05 to $1,198.00. Shares closed Thursday at $1,181.59. The consensus 12-month price target was $1,232.21 before the earnings report.