Alphabet revenues hit $32.7 billion on strong ad sales

Posted July 25, 2018

The Google parent reported better-than-expected second-quarter profits and revenue on Monday - despite the company's recent $5 billion antitrust fine levied by the European Commission.

As expected, the company's net income was hurt by a record $5 billion antitrust fine imposed by the European Commission.

Shares rocketed more than 4pc in after-hours trade, as the market welcomed the strong results, in what could be a sign investors tempered.

Alphabet generated revenue of $32.66 billion during the second quarter of 2018, compared to $26.01 billion during the same quarter past year. Analysts estimated $9.52 per share, according to research aggregated by Thomson Reuters.

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Google has continued to give search ads more prominent space on mobile phones and bundle more of its ads products together, helping to fuel the brisk sales growth. After subtracting Alphabet's advertising commissions, revenue was $26.24 billion United States, also exceeding Street forecasts of $25.64 billion US.

Google also has tweaked its comparison shopping service as it strives to comply with an European Union ruling from a year ago, and it plans to soon release changes to how it handles political ads. While Google has said it will appeal, it has until mid-October to adjust its behavior.

Stripping out the fine to look at what's actually happening to its business, Alphabet earned $8.3 billion and blew past analysts' earnings estimates by over 23 percent.

The bulk of Alphabet's revenue continues to come from advertising, which amounted to $28bn for the quarter, or roughly 88 per cent of sales.

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The sums Google pays out to websites and mobile partners to distribute its search engine and ads - called Traffic Acquisition Costs - also rose to US$6.4 billion for the quarter.

Google's cost-per-click, which is how much it makes off each advertising click, decreased 22 percent year over year and 10 percent quarter over quarter. That doesn't seem to have investors too anxious, though, as the pre-fine numbers beat expectations by a large margin, driving up Alphabet's stock price in after-hours trading by 5%.

Areas such as cloud computing and "other bets" have also added to Google's spending. Its "Other Bets" category remains unprofitable overall, as well, with $145 million in revenue compared to $732 million in operating loss. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day.

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