Published: Tue, July 24, 2018
Money | By Hannah Jacobs

Shares surge at Google's Alphabet as it crushes forecasts

Shares surge at Google's Alphabet as it crushes forecasts

Google parent Alphabet shares lifted on a stronger-than-expected earnings report for the past quarter, as the tech giant's results eased concerns over huge fines imposed by the European Union for antitrust actions. When excluding the fine, earnings came to $11.75 United States per share, which topped the average estimate of $9.45 USA per share by analysts surveyed by Zacks Investment Research.

Revenues meanwhile jumped 26% from a year ago to $32.7 billion, better than most analysts expected. In the past, Google earned as much as 97 percent of its revenues from ads, but that number has been falling.

The European Commission hit Google with a 4.3 billion euro ($5 billion) fine last week for abusing the dominance of its mobile operating system. Google said it would appeal the ruling.

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


Amazon's encroachment into advertising has threatened Google's lucrative deals with media companies and advertisers.

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.

Europe's new data-privacy rule, known as the General Data Protection Regulation, also appeared to have had little effect on Google's bottom line.

The Mountain View, Calif., company's $32.66 billion in second-quarter revenue, 86 percent of which came from Google's advertising business, beat Wall Street's estimate of $32.17 billion.


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. Company Chief Financial Officer Ruth Porat said the investments were necessary for the company to maintain an edge in machine learning and other future technologies.

"One of the biggest opportunities for investment continues to be in our ads business", Porat told analysts on the earnings call.

Areas such as cloud computing and "other bets" have also added to Google's spending. Sales from its "Other Bets", which include Google's cloud business and hardware division, rose almost 50 percent to $145 million.

Other Bets, the home of Google's riskier, experimental businesses, lost $732 million in the quarter, versus a loss of $633 million in the same period a year earlier.


Built on the strength of its advertising empire, Google saw surprisingly strong growth.

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