Google profits soar despite $5B antitrust fine

24 July, 2018, 18:44 | Author: Brooke Harris
  • Google's attempt to settle its antitrust case in Europe was too little and too late

Shares in Google parent Alphabet jumped in after-hours trading Monday as the company's second-quarter results exceeded Wall Street forecasts after taking into account a $5 billion U.S. charge levied by European regulators. Alphabet earned $11.75 a share, excluding the fine, easily beating analysts' estimate of $9.54 a share. Google is appealing the ruling.

Last week, US President Donald Trump attacked the European Union (EU) for the fine slapped, and said: "The European Union just slapped a $5 billion fine on one of our great companies, Google", Trump tweeted.

Meanwhile, Google's "other revenues" category, which includes its cloud business as well as hardware sales such as the Pixel phone and Google Home smart speakers, reported $4.4 billion in revenue, a 36.5 percent year-over-year jump. Government pressure to improve moderation of user-created content has forced Google to hire more analysts.

Although advertising remains the key driver of revenue, Googlehas been moving into cloud computing services for businesses, artificial intelligence and devices, including its Pixel smartphones and notebook computers.

Profit dipped 9.3% to $3.2 billion in the second quarter after accounting for the European Union fines, the company said.

Alphabet's revenues in the quarter increased 26 percent to $32.7 billion as users clicked on more of the ads that Google serves atop its search results and before YouTube videos.

Google's attempt to settle its antitrust case in Europe was too little and too late

Adjusted Earnings: $US11.75 per share compared to an expected $US11.68.

The quarterly growth rate of what the company pays ad partners, called traffic acquisition costs, fell for the first time in three years, which Atlantic Equities analyst James Cordwell described as the "most impressive" piece of the results. "Other bets", such as Waymo and Fiber, saw revenue rise 49% but only totaled $145 million in the quarter.

During its earnings call, CEO Sundar Pichai declined to answer any questions about how the EC's fine would impact its mobile business. While Google has said it will appeal, it has until mid-October to adjust its behavior.

Alphabet shares were up 3.6 percent to $1,254.12 in after-hours trade.

Alphabet trails Facebook, Amazon and Twitter Inc in valuation as measured by the ratio of enterprise value to expected earnings.

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