This was Google's worst margin since 2012.
Furthermore, another red sign is that the company also reported Other Income of $3.5BN, of which $3.031BN was a gain on equity securities, meaning that most of the EPS beat was largely due to accounting and tax gimmicks.
Alphabet disclosed that according to a new accounting standard it has to change how it accounts for equity security investments, and that all gains and losses, unrealized and realized, on equity security investments are recognized on the income statement.
The gain on equity securities was $3.03 billion In other news, Alphabet reported free cash flow for the first quarter of $4.34 billion and 1Q capital expenditure $7.70 billion: CapEx more than tripled up from $2.4 billion to $7.7 billion year-on-year, suggesting that the company will need to invest aggressively to keep the current growth rate.
That probably reflects spending on hardware, including the Nest division, as well as the company's purchase of the Chelsea Market in NYC.