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Comment by MarkMc | Hacker News Reader

Revenue is up 22% but EPS is up only 7%. I would normally expect Google's EPS growth to be higher than revenue growth. Where are they spending all that extra income?

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They did increase headcount by more than 10k (from ~62k to ~72k). Headcount tends to produce more revenue eventually, but there's a lag. Staffing up by that much indicates that they're predicting significant growth.

(I'm an employee, with clear biases)

Precisely this. Large scale infrastructure growth also costs quite a bit, especially when you pay for your own network and other works in progress https://cloud.google.com/about/locations/

No, that doesn't explain it. Some cost has to be going up by much more than 22%. Headcount only went up 16% - ie. from 62k to 72k.

Market rate for engineers has outpaced inflation for some time. That accounts for some of that gap.

On electricity to train all those deep neural networks.

Their DeepMind AI has actually decreased their energy consumption at their data centers.

http://www.techrepublic.com/article/google-uses-deepmind-ai-...

But they could still be spending more aggregate money on hardware for their deep learning hardware than previously.

Notice that their TAC expenses for paid traffic went up over half a billion dollars to 10% of revenue from 8%. They are spending more to buy more traffic to grow click rate to cover lower CPC rates. You can model that like taking a hit to the gross margins.

Taxes.

Quite right - thanks. If Alphabet had paid the same tax rate as the previous year then net income for the quarter would have been $6.49 billion, an increase of 32%.

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