Alphabet, the parent company of internet search giant Google, topped Wall Street revenue targets in its final three months of the year, but rising losses in its “other bets” and swelling costs to partners spooked investors.

Google’s stock was down 3.5% in after-hours trading on Monday.

The company’s net revenue rose 23% in the fourth quarter compared to last year, but its payments to partners rose at a faster 26% clip. Meanwhile, losses from its collection of subsidiary businesses, including Waymo and Verily, were the steepest in two years, nearly doubling year over year.

While Google’s earnings per share were well above Wall Street targets, the company said $1.3 billion of its profit surprise in the fourth quarter was because of “unrealized gain recognized in OI&E [Other Income and Expenses] related to a non-marketable debt security.”

Google’s capital expenditures also more than doubled year over year in the fourth quarter to $25.4 billion. Alphabet chief financial officer Ruth Porat said in the earnings call on Monday that “with respect to Capex, we continue to invest in both compute requirements and for office facilities, although we expect the capex growth rate in 2019 to moderate quite significantly.”

Here’s what Alphabet reported:

  • Net Revenue (excluding TAC): $31.69 billion, up 23% year over year, and above the $31.33 billion that analysts expected.
  • Q4 EPS (GAAP): $12.77, compared with $10.86 expected by analysts.
  • Other bets revenue: $154 million, compared with $131 million last year.
  • Other bet operating loss: ($1.328) billion, versus ($748) million last year.
  • Traffic acquisition costs (TAC): $7.4 billion, or 23% of advertising revenue, compared with 24% of advertising revenue during last year.
  • TAC to distribution partners: $3.506 billion, up 26% year over year.
  • Google’s capital expenditure: $25.4 billion, compared with $12.6 billion during the same period last year.
  • Employees: 98,771, adding more than 4,000 employees to its payroll in the fourth quarter.

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