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Here’s why Alphabet stock just fell off a cliff

Google is having a lousy morning, but all hope is not lost.

Here’s why Alphabet stock just fell off a cliff
[Photos: 3844328/Pixabay; Paweł Czerwiński/Unsplash]

Google is having a lousy morning, but all hope is not lost.

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Shares of its holding company, Alphabet, were down more than 8% in early trading after the company missed earnings projections yesterday. According to Bloomberg, it was Google’s worst intraday loss since 2012.

So what happened? In a nutshell, Google’s advertising business is not growing as fast as analysts projected. The company reported revenue of $36.34 billion, versus expectations of $37.32 billion. For Alphabet, an earnings miss of this magnitude is rare.

After the report, analysts were quick to rethink Google’s potential for future growth. “This quarter will no doubt result in a reset to forward expectations, particularly for the ads business, as investors search for reasons for the fairly meaningful deceleration,” Nomura Instinet analyst Mark Kelley told CNBC.

[Screenshot via Google]

Of course, companies miss revenue projections all the time, but when you have a winning streak like Alphabet has had, people notice when it ends. In a research note today, MoffettNathanson’s Michael Nathanson said analysts were perhaps “all lulled to sleep” by the company’s 14 consecutive quarters of more than 20% organic revenue growth.

That said, Nathanson was cautious not to paint an apocalyptic picture of one of the world’s most valuable companies. “With this miss in the books (albeit flagged but meaningful), we believe that investors will give this stock the benefit of the doubt,” he wrote.

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About the author

Christopher Zara is a senior staff news editor for Fast Company and obsessed with media, technology, business, culture, and theater. Before coming to FastCo News, he was a deputy editor at International Business Times, a theater critic for Newsweek, and managing editor of Show Business magazine

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