Alphabet posted its second highest quarterly capital expenditure figure ever, a princely $7.08 billion, and Chief Financial Officer, Ruth Porat is promising worried investors that they'll be seeing the web giant slow down on spending in the near future. Traffic acquisition costs, meanwhile, sat at $7.44 billion for the quarter. This means that there was a grand total of $14.52 billion for the quarter in major spending, more than one third of the quarter's $39.28 billion in total revenue.
This massive spending represents a capex jump of close to $4 billion year-on-year, and is about $1.7 billion higher than last quarter. A figure that accounts for a number of things, including talent costs, resource acquisition and maintenance, as well as research and development costs.
Alphabet and its relative companies have a long history of making vast amounts of money each quarter, and spending large swaths of that in order to ensure that the revenue continues to roll in. While investors didn't seem fond of the high spending, this isn't exactly new territory for Alphabet or Google.
The tech company's stocks saw a bit of a squeeze following the announcement. The expenditures weren't entirely to blame, as there was other areas including earnings per share that failed to meet expectations. The discrepancy between Wall Street's expectations and what Alphabet delivered was small, but it was clearly more than enough to give investors pause. Given Alphabet's fairly long history and the astronomical sums of money the company deals in, it's not hard to see why it's held up to high standards.
Traffic acquisition costs only grew 15-percent year-on-year, as seemingly high as they may have been. The important thing about that growth figure, however, is that it actually trailed growth in advertising revenue, something that hasn't happened for almost three years. Alphabet's "Other Bets" category, including things like Verily and Waymo, meanwhile, managed to net $154 million in revenue for the quarter, only about $30 million shy of analysts' expectations. That's still considered a failure by many metrics, but it's not bad for a category that was notorious for hemorrhaging money before.
If Porat's promise was in earnest, expect to see Alphabet's spending slow down in a meaningful way very soon. Just how it plans to wipe extra spending off the budget is unknown for now, but there are a lot of possibilities. Layoffs and talent acquisition costs are probably foremost in mind, given the current socioeconomic and political climate in both America at large and within Alphabet, but that's actually pretty unlikely; Alphabet spends a lot of time and money to net its talent, and it often takes a real scandal before someone is let go.
What's a bit more likely is that the company is going to slow down or perhaps even scale back plans for things like data center expansion, campus expansion, and high-dollar R&D jobs. Other possibilities include executive pay cuts, doubling down on project monetization in order to offset spending, and sunsetting some projects or departments, to name a few. Naturally, all of these are mere possibilities, and nothing is certain just yet.