The stock was falling 1.8% to $1,289 a share in postmarket trading, after having risen 1.95% in regular hours.
GAAP earnings per share came in at $10.12, missing Wall Street estimates of $12.32. EPS grew 18% year-over-year. Revenue was $40.5 billion, beating analysts estimates of $40.307 billion and growing 20% year-over-year. Google's operating margin was 23%, lower than last year's third quarter margin of 26% and lower than analyst's expectation of 23.4%.
Google's advertising revenue grew 17% to $33.9 billion. Cost-per-click grew 3% year-over-year, against last year's third quarter growth rate of negative 2%.
"I am extremely pleased with the progress we made across the board in the third quarter, from our recent advancements in search and quantum computing to our strong revenue growth driven by mobile search, YouTube and Cloud," said Sundar Pichai, CEO of Google, in a press release.
"We continue to invest thoughtfully in talent and infrastructure to support our growth, particularly in newer areas like Cloud and machine learning," said CFO Ruth Porat.
Alphabet will give guidance on its earnings call.
"Alphabet's earnings miss isn't as bad as it looks at first glance, since EPS was hurt by a $1.53 billion accounting loss recorded on equity investments," said TheStreet's Tech Columnist Eric Jhonsa. "However, accelerating operating expense growth also weighed on Alphabet's bottom line some."
Others agree the quarter wasn't so negative. "Google's headline EPS appears ugly, but when we take a good look under-the-hood, it's easily explained away," said Tim Collins, RealMoney columnist. "Three main drivers hit the bottom line: taxes, employee headcount, and other bets." "Other bets," the segment under which Google reports small bets with potential, posted a wider than expected net loss of $550 million.
Collins added: "Don't get caught up in the headlines. Simply put: business remains solid and growth continues to be strong."
Alphabet stock was up 22% for the year heading into the earnings.
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