Alphabet — Google's parent company — had its Q1 earnings call yesterday amid its slowest growth in 3 years. A 17% year-on-year revenue increase has some investors concerned and Google CEO Sundar Pichai had to answer some tough questions about the company's hardware prospects. One analyst even went as far as to compare the Pixel phones with Microsoft's unsuccessful smartphone lineup.
According to Alphabet CFO Ruth Porat, "recent pressures in the premium smartphone market" were to blame for lower than expected Pixel sales. She wasn't specific, but we can assume she means increased competition and decreased interest from consumers who are happy to save themselves a hefty chunk of cash and keep hold of their phone for longer. It could also be something to do with the honking great notch on the Pixel 3 XL and sizable bezels on the smaller model, at a time when other companies are coming up with more inventive and attractive designs that cost far less.
Pichai also got hammered on Google's hardware not representing significant revenues vs ads -- esp as ads slow down. One analyst even asked if we had another Microsoft on our hands (!). (Pichai was defensive, said Google is committed for the long term, but eek.) https://t.co/4qTGvfOqHM
— Ingrid (@ingridlunden) April 29, 2019
In spite of poor Pixel sales, Google's hardware division is producing revenue growth — $5.5 billion in Q1 2019 — but it will need to do even better to convince analysts and investors that it has the potential to be a consistent profit-maker in the face of falling ad revenue.
Pichai insisted Google is in it for the long-haul and announcing the Pixel 3a and 3a XL at I/O next month will represent the next phase of the long-term strategy. If you can't sell enough high-end phones, perhaps mid-range variants with the same camera tech and a headphone jack will do the trick. We could also see the recently leaked Nest Hub Max make an appearance at I/O as part of the company's wider 2019 hardware plans.
- The Verge