Alphabet reports robust earnings despite European Union fine

25 July, 2018, 03:03 | Author: Elaine Woods
  • Google's attempt to settle its antitrust case in Europe was too little and too late

Google's parent company Alphabet announced last night that it has posted a net profit of $3.2 billion on revenues of $32.7 billion in the quarter ending June 30.

Alphabet reported revenues of $26.24bn for the quarter, comfortably beating analysts' expectations, and made a profit of $2.8bn, down from a profit of $4.1bn for the same period previous year after the fine. Thomson Reuters had expected something more like $32.17bn.

Google parent Alphabet spent a whopping $5.5 billion on capital expenditures in the most recent quarter, almost doubling that output from a year ago as the company continues to expand its cloud business.

"It's like a delivery company having to pay for a parking ticket", Brian Wieser, a Pivotal Research analyst, said of the penalty, which Alphabet accounted for in the second quarter.

With the European Union penalty baked in, Google posted earnings of $4.54 per share on $32.66 billion in revenue.

Google's attempt to settle its antitrust case in Europe was too little and too late
Alphabet shares soar despite hit to profit from Google’s EU fine

Alphabet, Facebook Inc and other leading application makers have become big forces in advertising as consumers globally, and in turn, advertisers devote increasing attention to smartphone and TV apps instead of newspapers and traditional TV broadcasts. The company's collective headcount reached 89,058, up from 75,606 in Q2 2017.

Traffic acquisition costs, a key metric in Google's ad business, went up to 23% of ad revenue in the second quarter. Analysts were expecting US$25.55 billion, according to data compiled by Bloomberg. Google's advertising business grew 24% over the quarter.

"We're pleased with the ongoing momentum in our advertising businesses", said Porat on a conference call for investors, adding that Alphlabet has high hopes for the positive impact of machine learning on its ad business. Oddly enough, however, Alphabet isn't spending much money to get those groups going - capital expenditures for Other Bets was a puny $10 million for the quarter, compared to $148 million a year ago. "The common thread you'll head on today's call is the benefit of machine learning and artificial intelligence", he said.

"I think overall it [Android] has created more choice for everyone, not less", Pichai said during the call, when asked about the European Union decision. "One of the unintentional consequences of GDPR is the strengthening of the duopoly", said Gil Elbaz, a former Google executive who now runs the marketing firm Factual.

The Nasdaq Composite hit a record high on Tuesday as Alphabet's blowout results sparked a rally in high-growth stocks and bolstered expectations of a robust earnings season, while a rise in oil and metal prices boosted energy and material companies.

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