Alphabet reported a rare decline in profit during the third quarter, as its net income fell 23% on higher expenses, including a $1.5 billion unrealized loss on investments in other companies.
For the quarter ended Sept. 30, Alphabet—which gets nearly all of its revenue from its Google search division—said net income fell to $7.07 billion from $9.19 billion in the same period the year prior. Alphabet’s stock sank about 1% in after-hours trading.
Alphabet, which is an active venture capital investor, didn’t say which investments contributed to the loss. It had a significant stake in Uber and Lyft, although even at the current depressed stock price of both ride-hailing companies, Alphabet would be significantly up on what it originally paid for both. Alphabet also said its results took a hit from a $554 million legal settlement in France.
The company’s main business appears healthy. Revenue rose 20% to $40.5 billion from a year ago, only slightly less than its growth rate during the same quarter last year. But its total expenses, including research and development, during the period grew a bit faster at 25%. Alphabet CFO Ruth Porat told investors that the revenue growth came mainly from mobile search, YouTube and cloud computing.
Investors aren’t likely to panic unless they see trouble in Alphabet’s core Google business. If Alphabet continues to see big investment losses though, it might need to rethink its venture investing strategy.