Google, the parent company, Alphabet saw lower than expected profits in the last three months of 2017, after higher costs offset a big jump in the sale of advertising.
The tech giant has made quarterly profits of $6.8 billion (£4.8 bn), missing the $7 billion analysts had expected.
Revenues rose 24% to $32.3 billion, helped by advertising sold on its search engine, websites and applications.
But, in general, expenses rose Alphabet spent money to diversify beyond its core search business.
This investment in YouTube content, in an attempt to make the service more attractive to advertisers.
Alphabet shares fell by over 5% in after-hours trade, before pairing those losses.
The results for the October-December period excluded a one-time $9.9 billion in cost related to changes to the US tax code, that will lower tax rates. Revenues jump
Growing demands for ads enhanced for Google’s core advertising business.
The company sells advertising space on its search engine, its rapid growth, YouTube’s video streaming service, and a network of third-party web sites and applications.
And its algorithms have become more effective at delivering mobile ads, helping the Alphabet revenues exceeding $100bn for the first time.
But with more search is happening on mobile phones, Google has paid more to ensure its search engine is the default option on products and services including Apple’s iPhone and Mozilla Firefox browser.
Apple sells less phones, but earns more
Amazon sales jump by almost a third
While Google’s core ad business is booming, the company is also investing in other new initiatives – including expanding its cloud computing services, the development of the ability to self-guide the car and heads towards the health technology sector.
That have contributed to the expenditure increase of 27% in the quarter, compared with a year earlier, he said.
“We are focused on the construction of a second wave of growth within the Google in the medium and long term, Google chief executive Sundar Pichai said on a conference call, noting that cloud computing was generating $ 1 billion in quarterly sales.
The alphabet has also announced that a member of the board of directors and former Stanford University president John Hennessy would replace Eric Schmidt, chairman.