Google’s parent company, Alphabet, is doing a lot of spending, and that has some investors worried.
The number one internet search engine beat analysts’ expectations on the top line in the third quarter but missed on earnings per share.
Alphabet (GOOGL, GOOG) revealed that its capital expenditures increased to $6.73 billion in the third quarter, compared to $5.28 billion in the year-ago quarter as it spent more on the cloud and consumer electronics.
Brad Gastwirth, chief technology strategist at Wedbush Securities, told Yahoo Finance’s “The First Trade” that the higher spending is a concern but says overall, the quarter was “pretty solid.”
“You can explain the higher spend,” said Gastwirth. “They are spending for growth, and it’s hard to find that many negatives from the quarter.”
“All three are going to be winners. It’s not going to be a zero-sum game,” he said. “In terms of the near-growth opportunity, you’re going to see significant growth from cloud and that should help drive revenue and profits for them [Google].”
We also learned that Alphabet’s self-driving car company, Waymo, is burning through cash, losing $941 million during the quarter, up from a loss of $727 million a year ago. Alphabet has long stressed that Waymo is a long-term opportunity for the company.
“That division will do very well. That’s a big growth driver for them,” said Gastwirth. He also said there could come a time when it makes sense for Alphabet to spin off Waymo, but he declined to offer a timetable.
Grastwirth said it’s important to remember that Alphabet’s stock was at an all-time high the day before its earnings announcement and that Tuesday 2% pullback in the stock price is “not that big at all.” On Monday, Google’s stock hit a record $1,299.24 intraday.
Alexis Christoforous is co-anchor of Yahoo Finance’s “The First Trade.” Follow her on Twitter @AlexisTVNews.