However investors were cheered by the company posting a stronger-than-expected 22.2 percent increase in quarterly revenue, with Alphabet's net income rising to $5.33 billion in the fourth quarter. "Our growth in the fourth quarter was exceptional", chief financial officer Ruth Porat said in a release.
This time again, YouTube, mobile search, and programmatic proved as key drivers for an above-industry performance.
Alphabet will "continue to calibrate the magnitude and pace" of its investments in other bets, and "exercise careful stewardship over the amounts and pace of investments", Porat said. In contrast, Alphabet's moon-shot "other bets" generated revenues of $262 million and operating losses of $1.08 billion.
Google's ad revenue, which accounts for the bulk of its business, rose 17.4 per cent to US$22.40 billion in the fourth quarter.
That sounds like an unbelievable performance but investors were not thrilled - Alphabet shares were down 2% in January 27 pre-market trading.
The increase in search engine ad revenue also highlights the payoff from Google's 2006 acquisition of YouTube for $1.65 billion.
Google parent Alphabet's fourth quarter earnings report suggests that Google's attempts to broaden its revenue streams over the past several years may finally be beginning to gain some traction. Since the majority of Alphabet, and Google's revenues are still driven by advertisements, any increase in this segment was bound to affect the complete picture.
On a sour note, Alphabet's Cost of Revenue rose to 41% from 38% in the year-ago period. Although Google's online store sold Pixels compatible with other wireless networks, most people don't shop for phones that way. The moon shots includes things like Project Wing and Google's self-driving vehicle project which has now transformed into Waymo, and while they're certainly ambitious and lofty goals that the company sees as a beneficial series of developments, the research and development for those projects also doesn't come cheap.
"This was the year that mobile shopping truly went mainstream", said Mr. Pichai, who talked up how retailers used branded images on Google's mapping product to reach consumers right when they were looking for places to shop. Total revenues for 2016 were $90.3 billion vs. $75 billion in 2015.
On voice search and related monetization, Sundar Pichai said, "We are really excited about [voice search]".