Alphabet misses Wall Street revenue estimates; shares fall

Third-quarter results fanned investor concern that big investments in new businesses, increasing regulatory scrutiny and emerging competition are producing slow and unpredictable returns. (AP)
Updated 26 October 2018
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Alphabet misses Wall Street revenue estimates; shares fall

  • Overall revenue rose 21 percent to $33.74 billion
  • After falling as low $1028.77, Shares of Alphabet were down about 3 percent to $1,071.01 after hours from their close at $1103.59

Google parent Alphabet Inc. on Thursday missed analysts’ quarterly revenue estimates for the first time in at least two years and reported continuing erosion of its operating margin, sending shares down almost 7 percent after hours.
The tech company’s third-quarter results fanned investor concern that big investments in new businesses, increasing regulatory scrutiny and emerging competition are producing slow and unpredictable returns.
Alphabet disclosed, for example, that passengers of its self-driving Waymo minivans are now paying for rides, but the offering remains limited to the Phoenix, Arizona region and Waymo’s finances are not broken out.
Overall revenue rose 21 percent to $33.74 billion, missing analysts’ estimate by about $310 million, according to Refinitiv data.
Google ad sales contributed 86 percent of revenue, but growth slowed to 20 percent from nearly 24 percent last quarter.
“Google’s earnings momentum remains strong,” said Haris Anwar, senior analyst at Investing.com. “But if you dig in a little deeper, there are cost pressures which are building up and are mainly responsible for this period’s disappointment.”
The company attributed much of the slower revenue growth to unfavorable currency exchange rates. Lower ad pricing to contend with antitrust concerns, new privacy rules in Europe and increased competition from Amazon.com Inc. may have played a role too, financial analysts said.
Non-advertising revenue, such as from sales of mobile apps and cloud computing services, also came in slightly below expectations.
Those results combined with rising expenses brought down the company’s operating margin to 25 percent from 28 percent a year ago.
After falling as low $1028.77, Shares of Alphabet were down about 3 percent to $1,071.01 after hours from their close at $1103.59.
Alphabet reported net profit of $9.2 billion, or $13.06 per share, compared with $6.7 billion, or $9.57 per share in the year-ago quarter. That beat the average analyst estimate of $10.45.
Earnings were boosted by a lower tax rate and favorable valuation of the firm’s investments in startups such as Uber Technologies Inc.

New businesses
Alphabet has committed to providing cloud computing services and selling hardware over the last few years. It has also ventured into areas where commercial opportunities are nascent, including regions such as India and Nigeria and businesses such as self-driving cars.
The Waymo operation in Phoenix is in the early stages of testing pricing, Alphabet Chief Financial Officer Ruth Porat said on a conference call on Thursday, noting that some employers were sponsoring workers’ rides.
Priming Alphabet’s newer ventures has been costly in terms of marketing and hiring, with about 5,300 employees added in the third quarter.
Alphabet’s cost of revenue was $14.3 billion in the third quarter, up 28 percent from a year ago. Capital expenditures soared to $5.3 billion from $3.5 billion last year, with 20 data center sites in development, Porat said.
Google has posted strong revenue growth for several years as retailers flock to buy product image ads on Google’s search engine and commercials on YouTube.
But Google’s cost structure has been disrupted by surges in usage of its services on smartphones, where the company splits ad revenue with technology makers such as Apple Inc, and smart speakers, where ads do not appear.
Google has been fined $7.7 billion for antitrust violations in Europe over the last two years, and heightened attention on privacy, security, competition and the rise of artificial intelligence tools has led investors to fret about potentially costly regulatory scrutiny in the United States and elsewhere.
The steady revenue growth had helped Alphabet weather an otherwise bruising last few months on the stock market for big technology and communications companies.
Alphabet gained 5.8 percent this year before Thursday and traded at 24 times expected earnings over the next year. Shares of No. 2 online ad firm Facebook Inc, which faces questions about flattening usage limiting revenue growth, had fallen 12.5 percent and were trading at 19 times future earnings.


From moros to mass tourism — historical bonds fuel Saudi-Spanish tourism takeoff, says ex-Balearic leader

Updated 10 sec ago
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From moros to mass tourism — historical bonds fuel Saudi-Spanish tourism takeoff, says ex-Balearic leader

  • Jose Ramon Bauza says Saudi-Spanish tourism ties may be in their infancy but are poised for a fruitful relationship
  • ‘Kingdom has everything to become global leader on vacational and family destinations,’ former Spanish senator tells Arab News

MADRID: Saudi-Spanish tourism ties may still be in their infancy, but for Jose Ramon Bauza Diaz, they already have the makings of a “family affair.”

“We are at the very beginning of what should be a fruitful and successful relationship,” the former Spanish politician turned tourism consultant told Arab News on the sidelines of FITUR, the flagship global tourism fair.

“Everything has yet to be done. I think we are not starting from scratch, but we are at a starting point, and we have both the opportunity to do a lot of things together.”

Spain welcomed a record 93 million visitors in 2024, overtaking the US as the world’s second most visited country by international arrivals. The Kingdom represents a small proportion, with around 182,000 Saudis visiting in 2023.

Even so, Bauza believes the two countries are “warming up” fast, helped by deep historical links dating back to the presence of ‘moros’ — ancient Arabs whose legacy is etched into the Iberian Peninsula’s culture and architecture.

“We believe in the same principles. We believe in family, we believe in trust. We believe in doing things (together). We love being together; we are not people who want to be isolated,” he said. “This is a specific and privileged starting point.”

Tourism is a central pillar of Saudi Arabia’s Vision 2030, with the Kingdom only fully opening up to global visitors about a decade ago. In 2025 it welcomed more than 122 million domestic and international visitors, a 5 percent year-on-year rise that keeps it on track to reach 150 million by the end of the decade.

Religious tourism has been a key driver alongside a strong push into the luxury segment, but Bauza warned that overreliance on a narrow niche could limit the sector’s full potential.

“Saudi (Arabia) is currently very focused on the luxury (segment); that’s perfect — it is (already) one of the best in the world (in that market). But I think the Kingdom can (also) be the best in the world in vacation tourism, family tourism, and the upper middle to high-end (segment),” he said.

Drawing on Spain and Europe’s experience as industry leaders, he argued that no country can afford to compromise on quality.

“Everyone that (sets) quality (apart) is penalized,” he stressed. “Saudi has everything to be a top luxury destination. But as well that, to be the top vacational and family destinations (offering) high quality standards.”

Despite sluggish global growth, the tourism market is set to expand in the coming years, driven by rising consumer demand and easier access to international travel. The sector already accounts for just under 10 percent of global gross domestic product, supports more than 330 million jobs, and is growing about 1.5 times faster than the world economy. A recent report by the World Economic Forum and Kearney projects that annual tourist trips will reach 30 billion by 2034.

For Bauza — who during his tenure as a Member of the European Parliament served as chair of the Tourism Task Force and a member of the delegation for relations with the Arabian Peninsula — these numbers underline both the scale of opportunity and the difficulty of expanding responsibly, especially when it comes to sustainability.

“I always prefer to talk about quality than quantity,” he said. “When I was president of the Balearic Islands, I was not running for how many million tourists we had, but (rather) on how many quality tourism opportunities we could offer.” He added that with the right strategy, quality and quantity could grow together without “over-touristifying” a destination.

Spain has wrestled with over-tourism in recent years, triggering local protests over the sheer volume of visitors. The Balearic Islands, Barcelona, Andalusia and other hotspots have seen mounting anger over the impact on daily life, from water shortages to urban changes that increasingly cater to tourists rather than residents.

“What’s important is to have properly scaled infrastructure to provide the best services,” Bauza said, arguing that destinations needed clear plans taking residents’ needs into account as well as the efficiency and resilience of buildings and infrastructure.

“If we know we will grow in an area in the next 10 or 15 years, we need to provide the infrastructures and the structures (in advance),” he said, adding cities must be designed for both those who live there and the visitors who arrive from around the world, with “a common way of thinking that tourism is part of the way of living.”

Riyadh has made sustainability a core principle of its development blueprint. Flagship projects such as the Red Sea Project, Neom and Amaala are framed around 100 percent renewable energy, biodiversity conservation and bans on single-use plastics in a bid to create “nature-first” destinations.

Bauza said Saudi Arabia — which skipped this year’s FITUR despite a strong regional presence — has a chance to learn from mature tourism markets where rapid growth has brought economic gains but also environmental and social strain when not managed holistically.

“We have the knowledge of the tourism sector,” he said. “As a former president of the Balearic Islands, I’m proud that the big global brands are not only Spanish, they are from Mallorca and Ibiza. We can put this (experience) on the table — not to (tell) anyone what to do, not at all. (But) just to say to them: ‘Look at what we’ve done, see if it works for you. Copy it (if it fits). Let’s do it together because we have decades of experience’.”

In 2021, the tourism ministers of Saudi Arabia and Spain signed a joint statement to “redesign tourism,” agreeing to cooperate on three pillars — sustainability, digital transformation (including smart destinations and data sharing) and human-capital training.

These commitments were renewed in May 2025, when Madrid and Riyadh sealed four new private-sector deals to deepen investment and economic cooperation, with tourism highlighted as a strategic priority.

Spain now sees Saudi Arabia as a key Middle Eastern growth market. The 182,000 Saudis who visited in 2023 made the Kingdom Spain’s top Gulf Cooperation Council source market within a broader Gulf visitor base of 434,000 that year. That momentum has spurred a rise in investment flows.

Leading Spanish hospitality groups such as Melia Hotels International and Barcelo Hotel Group — both out in force at FITUR — are expanding their footprint in the Kingdom. At TOURISE 2025, Melia, Spain’s largest hotel operator, signed a Memorandum of Understanding with Saudi Arabia’s Tourism Development Fund to develop around 1,000 hotel rooms, while Saudia has launched direct Jeddah-Barcelona flights to complement services to Madrid and better integrate Saudi hubs with Spanish gateways.

Bauza welcomed the progress but said more must be done to unlock the full potential and build out services beyond core hospitality.

“Tourism is much more than hotel, much more than a restaurant, much more than a boutique, much more than an airport, much more than a museum. Tourism is an experience,” he said. “The goal is for Saudi people and Spaniards to work together. And the message is: It’s about to come (soon).”

“We need to trust each other, and we’re well prepared to take this step forward hand in hand, identifying the best options for quality tourism, not just quantity. Saudi Arabia is absolutely ready — globally, I see no country more committed.”

He added: “The key word is trust. We need to trust one each other, and we’re very well prepared to do this step forward together hand by hand, identify(ing) the best options for quality, not quantity tourism. And Saudi Arabia is absolutely prepared. Globally speaking, I cannot see any country who is much more committed.”

Bauza called for the Kingdom to secure a strong presence at FITUR to tell its own story: “If you’re not here, you’re not visible. You need a specific strategy for (showing) the many spectacular things you’re doing in tourism. I know because I’ve been there, but people who are not there, they don't know. (And) nobody’s telling them.”