How SpaceX Hurt Alphabet's Third Quarter Earnings

Dow Jones
3 hours ago

Alphabet stock plunged after a rare quarterly earnings miss. SpaceX didn't help the situation.

Wednesday evening, Alphabet reported operating profit of about $41 billion, up from $31 billion a year ago, on sales of $128 billion, up 25% from a year ago.

Sales were in line with Wall Street estimates. Operating profit missed by about $2 billion. That isn't great. The services business, which includes search, missed by about $1 billion. The cloud business, however, was about $1 billion above estimates, according to FactSet.

The bigger miss was net income. Alphabet reported bottom-line profit of $26.2 billion, missing estimates of $37 billion. Included in the miss, however, was an $8.2 billion "other" loss.

"Other" includes pretax mark-to-market losses of about $11 billion in SpaceX stock.

Alphabet owns some 550 million SpaceX shares, and they closed the third quarter at about $151, down $20 from the second quarter close of about $171.

Excluding the mark-to-market loss, earnings would have been closer to $2.80 a share, according to Barron's math. That's still short of the $3 analysts projected, but not as bad as the headline EPS of $2.12 indicated.

Of course, investors are smart. They know how to adjust numbers. And they aren't happy with Alphabet's results. Shares were down 10.7% in after-hours trading.

Through Wednesday trading, Alphabet stock was up just 4% year to date, trailing the S&P 500 by about nine percentage points.

 

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