Alphabet Inc. (GOOGL) is giving back all its gains from Thursday as it hurtles toward a six-month low in trading before Friday's open.
Alphabet shares are down 4.5% in premarket trading after a mixed earnings release Thursday night that boasted a strong beat on earnings per share, besting analyst estimates of $13.06 by $2.65, but a revenue figure that came short of expectations by $310 million.
"All in, despite the various achievements in the quarter, there is no sugar coating it, the release was ugly, and shares are taking a beating," Jim Cramer's Action Alerts Plus team, which holds Alphabet stock in its charitable trust, said. "We will not try and make excuses for why the company missed on the revenues."
The revenue miss marks the first time the company has missed Street estimates in two years, possibly adding to the sharp market reaction to the "ugly" results.
Alphabet executives blamed rising interest rates and a more challenging macroeconomic environment for the miss.
"Alphabet's consolidated financial performance for the quarter, our total revenues of $33.7 billion, reflect a negative currency impact year over year of $385 million, or $305 million after the impact of our hedging program," CFO Ruth Porat said, pinpointing a possible culprit for the size of the miss.
The lamenting of exchange rates and macro pressures that include the much-reported tariffs prove that Alphabet is not immune to the factors that have hampered the results of so many international companies this earnings season.
Alphabet CEO Sundar Pichai said expenditures to position the company for longer-term growth have increased significantly.
"We have really ramped up both in terms of our investments, our direct investments, but also our partnership strategy is beginning to work," Pichai said. "When I look at the pipeline ahead, that's we are clearly seeing momentum."
Pichai noted that the increased spending for the company is part of its strategy to "lay the foundation" for future programs.
CFO Porat noted that many of the company's investments in future-minded programs are weighing on quarterly profit. She specifically mentioned projects such as visual search features, Waymo's autonomous driving push, and cloud computing.
"We continue to invest for opportunities that are sizable over the long term," she said. "Sundar has already commented on both hardware and cloud as really important examples, and we think the steps that we're taking, the investments we're making, provide the foundational support for ongoing long-term sustained growth."
Despite its take on the "ugly" quarter, the Action Alerts Plus team was confident that these initiatives and current spending justify owning the stock for the long term.
"When we look out over the long term, we come to the conclusion that at current levels, with growth avenues such as those Alphabet has worked vigorously to expose itself to, while maintaining a healthy balance sheet with over $100 billion in cash, cash equivalents and marketable securities, this is a stock and company we want own and stick by through quarters such as this," the team concluded.