Alphabet, Google's parent company, reported Q1 2019 financials this week and while earnings increased compared to last year, the company missed revenue forecast. Google also revealed that the Pixel 3 phones didn't sell as well as expected and the CFO Ruth Porat attributed this to the increased pressure in the premium smartphone market.
For the first quarter of 2019, Alphabet earned revenue of $36.3 billion and operating income of $6.6 billion. In contrast, the company had reported revenue of $31.1 billion and operating income of 7.6 billion in Q1 2018. The company says that if it wasn't for the fine levied by the European Commission, it would have reported an operating income of $8.3 billion. The fine was slapped on the search giant for anti-competitive advertising practices.
Hardware stats are not posted separately by Google and the figures are instead reported under the "Other revenues" category. Last year, the company reported $4.3 billion in revenue and this year it reached $5.4 billion. So, while the Pixel phones failed to rake in as many sales as Google was expecting, it's safe to assume that other products such as Google Home speakers and Chromecast devices did well enough to make up for it.
In fact, the company's CEO Sundar Pichai explicitly said that the demand for the Google Home lineup remains strong and the company is satisfied with the current momentum. The CEO highlighted the fact that it hasn't been long since Google's entry in the hardware market and the company is pleased with its current portfolio.
Google also confirmed that it will be announcing new hardware on May 7 during its I/O developer conference while teasing new additions to the Home, Nest, and Pixel family. This means that alongside the Pixel 3a and Pixel 3a XL, the company might also launch the rumored Nest Hub Max.
The Pixel 3a and 3a XL are mid-range smartphones that Google is expected to announce next month. The phones will apparently come with mid-tier processors and without any bells and whistles but are rumored to have the same imaging capabilities as the more expensive Pixel phones.
When the Pixel 2 and Pixel 2XL were launched, they started at $649 and $849 respectively and with the release of the Pixel 3, the prices were increased significantly. The Pixel 3 and 3XL start at $799 and $899 respectively and apparently, these prices were anything but palatable for a huge majority of consumers. Currently, though, $200 have been shaved off the prices of the phones on Google's online store but this deal will expire before Google I/O kicks off.
Like you may have heard countless times by now, the smartphone industry isn't doing so well so Google can be cut some slack here. However, it is worth mentioning that the highest end variant of the Pixel 3 XL costs $999 and it doesn't seem like smartphone consumers are willing to shell out that much for a smartphone. Add to this the fact that competition from Samsung, Huawei, and Apple is intensifying. Sure, the Pixel phones are great when it comes to software updates and camera, but apparently, it will take more for people to upgrade. Lastly, the Pixel smartphones are Verizon exclusive and this has likely limited demand too.
It remains to be seen if the upcoming Pixel 3a and Pixel 3a XL would improve the situation, given the fact that they are expected to cost around $500 and with a few more bucks, you can actually get smartphones fueled by premium chipsets from Chinese companies.