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Alphabet beat profit estimates for its first-quarter earnings but lost more money on its ‘Other Bets’

The non-Google businesses are costing more to run.

Google Developers Event Held In San Francisco
Alphabet CEO Larry Page
Justin Sullivan / Getty

Google parent company Alphabet beat Wall Street estimates for first-quarter earnings, but it continued to lose more money on its experimental division that includes its self-driving car business and its life sciences group.

The company posted a profit of $7.73 a share, beating the expected $7.38 a share. Google’s ad revenue, minus partner payouts, reached $16.8 billion, versus the predicted $16.4 billion. The stock surged 3 percent in after-hours trading.

Google’s other revenue, which includes areas like hardware, software and cloud, made about $3 billion in the first quarter, compared to $2 billion in revenue a year ago.

But the company continued to lose money on its so-called “Other Bets” category, the group that includes the company’s ambitious forays into areas outside of its core advertising business, such as it’s self-driving car company Waymo and Verily, which does medical research.

This group swung to a wider loss of $855 million the first quarter, higher than the $744 million it lost in the same period last year.

Headcount is up 15 percent to about 74,000 employees. The increase was primarily related to cloud hiring, Google CEO Sundar Pichai said.

The company is trying to catch up to Amazon Web Services, which is much bigger. That means Google will need to be more aggressive about drawing new customers if it’s going to gain ground.

Alphabet reported revenue for specific world regions for the first time. U.S. revenue increased 25 percent compared to a year ago, to $11.8 billion.

Sales from the Asia-Pacific region rose 29 percent to $3.6 billion, while revenue from Europe, the Middle East and Africa was up 13 percent to $8.1 billion. U.K. revenue was part of the latter, and increased only 5 percent year over year, to $2 billion.

The recent advertiser boycott of YouTube over ads appearing within inappropriate videos started in the U.K. and was concentrated there.

Interestingly, Pichai seemed to imply Google’s artificial intelligence assistant, called Assistant, was more focused on the Pixel phone than the Home device that competes with Amazon Echo. This is interesting because it’s Home, not Pixel, that tends to get attention as the main hardware vehicle for Assistant.

“Pixel is a good example because I think it’s the place where we do the leading work here,” Pichai said about how consumers are interacting with Assistant.

He said the presentation of Assistant in the Pixel was “well received” by consumers and is helping them engage more with Google “at a broader level.” He did not mention Home.

Google recently lost a leading engineer on Home and Pixel, David Foster, the vice president of hardware product development, according to Bloomberg. Foster, who previously led development of the Kindle at Amazon, left Google after only seven months with the company.

His departure comes amid reports from German tech news site WinFuture that Google is planning to launch new Pixel devices later this year.

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