(Reuters) — Google-parent Alphabet’s worst fourth-quarter revenue growth since 2015 sent shares down nearly 5% on Monday, overshadowing the disclosure for the first time of YouTube advertising revenue. Revenue from Google’s cloud service rose 53% to $2.6 billion in the quarter and advertising on YouTube rose 31% to $4.7 billion. In addition, YouTube generated about $750 million in subscription and other non-advertising revenue, Alphabet CEO Sundar Pichai said.

Google through its namesake search engine as well as properties such as YouTube has been the web’s biggest draw for advertisers for a decade, enabling it last month to become the fourth listed company to top $1 trillion in market capitalization. But new concerns have emerged among investors about whether its dominance will last as U.S. antitrust regulators investigate Google and as Amazon.com and Facebookcontinue to grow their ads businesses globally.

Google has blamed foreign exchange rates and one-time product changes for recent lapses from the 20% revenue growth investors had grown accustomed to from the company. Overall sales in the fourth quarter were $46.08 billion, up 17%, compared with an average estimate of $46.94 billion among financial analysts tracked by Refinitiv. Google ad sales in the holiday shopping quarter were $37.93 billion, up 16.7% from the same period last year, while Google’s “other” revenue bucket including app store purchases and cloud computing deals rose 21.6% to $7.88 billion. Shares of the company fell about 4.66% in extended trading to $1,413.28.

“The stock was priced for perfection, and a top-line miss was enough to send it lower,” said Michael Pachter, analyst at Wedbush Securities. “YouTube was impressive at $15 billion for the year, Cloud less so at $8.9 billion.”

Pichai said YouTube had 20 million paid subscribers for YouTube’s Music and Premium packages and separately had 2 million paid subscribers for its TV service. Other financial analysts said YouTube’s ad revenue was underwhelming. “YouTube is smaller than generally assumed, but on the flipside, search seems to have accelerated and is growing faster than feared,” said James Cordwell, analyst at Atlantic Equities.

Alphabet’s expenses have ballooned with hiring of thousands of salespeople, building of new data centers and marketing the Google brand through hardware and other ventures. For the fourth quarter, Alphabet’s total costs and expenses rose 18.5% from a year ago to $36.809 billion. That left profit of $10.67 billion, or $15.35 per share, compared with the analysts’ average estimate of $8.787 billion, or $12.53 per share.

Google faces internal challenges too. Some of its 119,000 employees have resisted working on weapons-related software for militaries or censored search products for Chinese users, leading Google to abandon such efforts. Others have expressed frustration with curbs on companywide discussions and what they have described as retaliation for labor organizing.

In December, Pichai gained the additional role of Alphabet CEO from Larry Page as he and fellow co-founder Sergey Brin stepped back even further from day-to-day management. It is unclear whether Pichai plans major changes to quell workplace unrest. But a shareholder lawsuit, which alleges that company leaders covered up sexual misconduct at Google, recently entered mediation and threatens to loosen the control held by Pichai, Page and Brin.

On Monday, Pichai told analysts his investment approach would be similar to that of his predecessors. His promotion coincided with the changes to Alphabet’s financial disclosures, which investors before generally criticized as too opaque to understand how it is weathering specific challenges. Shares of Alphabet are up 28.1% in the last 12 months entering Monday, compared with 21.8% for Facebook shares, 23.5% for Amazon, 68.1% for Microsoft, and 88.7% for Apple.

Coronavirus

Alphabet Chief Financial Officer Ruth Porat said the outbreak of a new coronavirus in China could affect the company’s hardware business if it leads to protracted work stoppages in Asia. Google said last week it is temporarily shutting down all its offices in mainland China, Hong Kong, and Taiwan due to the coronavirus. It has thousands of engineers and an untold number of salespeople across the region, including a hardware engineering base in Taiwan.

Chinese advertisers spend billions of dollars annually on Google ads to reach customers abroad, as many Google apps are blocked locally by Beijing’s tight controls on the internet. While Facebook is taking down misinformation about the fast-spreading virus, Alphabet’s YouTube, which has 2 billion monthly users, said they do not consider inaccurate information about health to be a violation of their policies.



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