Google-parent Alphabet Inc's worst fourth-quarter revenue growth since 2015 sent shares down nearly 5 per cent on Monday, overshadowing the disclosure for the first time of YouTube advertising revenue.
Revenue from Google's cloud service rose 53 per cent to US$2.6 billion in the quarter and advertising on YouTube rose 31 per cent to US$4.7 billion.
In addition, YouTube generated about US$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 US$1 trillion in market capitalisation.
But new concerns have emerged among investors about whether its dominance will last as U.S. antitrust regulators investigate Google and as Amazon.com Inc and Facebook Inc continue to grow their ads businesses globally.
Google has blamed foreign exchange rates and one-time product changes for recent lapses from the 20 per cent revenue growth investors had grown accustomed to from the company.
Overall sales in the fourth quarter were US$46.08 billion, up 17 per cent, compared with an average estimate of US$46.94 billion among financial analysts tracked by Refinitiv.
Google ad sales in the holiday shopping quarter were US$37.93 billion, up 16.7 per cent from the same period last year, while Google's "other" revenue bucket including app store purchases and cloud computing deals rose 21.6 per cent to US$7.88 billion.
Shares of the company fell about 4.66 per cent in extended trading to US$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 US$15 billion for the year, Cloud less so at US$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 per cent from a year ago to US$36.809 billion.
That left profit of US$10.67 billion, or US$15.35 per share, compared with the analysts' average estimate of US$8.787 billion, or US$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 organising.
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 criticised as too opaque to understand how it is weathering specific challenges.
Shares of Alphabet are up 28.1 per cent in the last 12 months entering Monday, compared with 21.8 per cent for Facebook shares, 23.5 per cent for Amazon, 68.1 per cent for Microsoft Corp and 88.7 per cent for Apple Inc.
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.
(Reporting by Paresh Dave in San Francisco and Munsif Vengattil in Bengaluru; Editing by Sriraj Kalluvila and Lisa Shumaker)