Google owner Alphabet's profits drop after $5bn fine but shares surge
Google owner Alphabet's profits drop after $5bn fine but shares surge
Alphabet's quarterly profits fall after $5 billion EU fine
24 July, 2018, 21:39
Shares in Alphabet, Google's parent company, jumped as much as 5% in after-hours trading after the firm reported stronger ad sales than expected.
While the European Union fine, announced last week as a penalty for abusing the market dominance of its Android operating system, did eat into profit, on an adjusted basis the company posted earnings of $11.75 a share, ahead of analyst estimates for $9.59. "As we have noted previously, we are happy to underwrite Google's investments as this should enable the company to sustain what should be greater-than-20% FX-neutral revenue growth over the longer term". Google's traffic acquisition costs, which includes the money it pays to phone manufactures, like Apple, to use its services like search was $6.4 billion, or 23 percent of its advertising revenues. The company is selling more ads as its YouTube video service and Google search grow globally, he said.
According to a Mint report, profits of the second quarter in Alphabet reduced by 9.3 percent, to $3.2 billion.
As usual, Alphabet will be holding a conference call with CFO Ruth Porat and Google CEO Sundar Pichai at 4:30 PM ET, and we'll be updating this post with any additional information the company shares.
European Competition Commissioner Margrethe Vestager told Bloomberg that Google began trying to resolve the investigation a year before the fine was imposed.
Investors welcomed the news enough to push Alphabet's stock up to an all-time high of $1,265 a share late Monday, valuing the stock at around $875 million.
What makes these results most impressive, perhaps, is that they include that $5 billion European Union fine: Alphabet has already recognized the charge and is moving on. It is appealing the ruling. It is gaining ground on Amazon, the ecommerce giant that is the world's second... "Core search remains strong (led by mobile trends), and we continue to see large potential from 4 "call options" (YouTube, Cloud, hardware, Waymo), which should help drive the next $100 billion in revs", the analyst Brent Thill said. Google's advertising business grew 24% over the quarter.
In other parts of the Alphabet business, the ever-mysterious "other bets" segments pulled in $145 million, up 49 percent from a year ago - but losses have increased to $732 million (up 16 percent).
Also delighting Wall Street, Alphabet has apparently lowered the expenses in the non-Google businesses in its portfolio.
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