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Alphabet beats revenue forecast, but warns about rising costs

FILE PHOTO: A man holds his smartphone which displays the Google home page, in this picture illustration taken in Bordeaux, Southwestern France, August 22, 2016. REUTERS/Regis Duvignau/File Photo

(Reuters) - Alphabet Inc surpassed Wall Street expectations for quarterly revenue and earnings on Monday, but it said costs were rising faster than sales and warned that as more traffic and searches shift to mobile devices the expenses would remain high.

The squeeze on expected future profit appeared to weigh on Alphabet's share price, which fell about 3 percent to $967 after the bell. Shares had closed up in regular trading.

Revenue for Alphabet, the owner of Google and YouTube, rose 21 percent to $26.01 billion in the second quarter ended on June 30, beating analysts' average estimate of $25.65 billion, according to Thomson Reuters I/B/E/S.

The growth in revenue, however, was slower than the 28 percent rise in the cost of revenue, a measure of how much money Alphabet must spend to keep its platforms running before added costs such as research.

The rising cost of revenue, including what Google pays to drive...