Published: Tue, July 24, 2018
Money | By Ethel Goodwin

Alphabet Earnings: What to Watch

Alphabet Earnings: What to Watch

Alphabet investors seemingly shrugged off the European Union's $5 billion fine against the company, sending the stock up sharply after Alphabet announced earnings that far exceeded analyst expectations.

Alphabet's $32.66 billion in second-quarter revenue, 86 percent of which came from Google's advertising business, beat an average estimate of $32.17 billion.

Alphabet shares have risen 15 percent since the beginning of the year, while the Standard & Poor's 500 index has risen 5 percent. The EU Competition Commission found that Google violated antitrust regulations by requiring that phone manufacturers install certain Google apps on Android phones (like Search and Chrome), pay these manufacturers to limit the installation of Search apps on their phones to Google Search, and ban the release of handsets using unapproved versions of Android.

Pichai was also circumspect about the company's cloud business, so as not to spoil expected announcements at Google Cloud Next '18, a conference focused on the Google Cloud Platform that opens in San Francisco on Tuesday.

Net profit dropped to $3.2 billion from $3.5 billion, due to the fine, but analysts focused on operating results.

That figure is way down from last quarter when Google spent $7.67 billion, a number that was juiced by the $2.4 billion purchase of the Chelsea Market building in NY. The shares rose as much as 5.3 per cent, the most in nearly nine months, to US$1,275 at the market open in New York Tuesday.

Analysts surveyed in advance by Yahoo Finance expected Google's parent company to post earnings of $9.54 per share on revenue of $32.17 billion for the quarter. It is appealing the ruling.

Naturally, Alphabet is presenting this info with some context, giving revenue and profit numbers for Q2 of 2017 and 2018 excluding those hefty fines.

"I'm confident we find a way to make sure Android is available at scale to users everywhere", Mr. Pichai said during the call with analysts.

"We delivered another quarter of very strong performance", chief financial officer Ruth Porat said.

While second-quarter sales jumped, so did costs for the technology giant. That leaves the infamously opaque "other revenues" segment - including the hardware business, Play Store, etc. - to bring in $4.4 billion in revenue.

Its Other Bets segment, which includes companies like the driverless auto firm Waymo, reported a quarterly operating loss of $732m, up from $633m a year ago.

Areas outside of Google's core ad business saw the strongest growth.

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