Alphabet's quarterly profits fall after $5 billion European Union fine

Alphabet

Alphabet

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.

Operating income for the period was $7.9bn, up 15 per cent year on year, or $2.8bn if you subtract the $5bn (€4.3bn) fine for breaking European Union antitrust rules, down 32 per cent. Alphabet's operating margin was 24 per cent without the fine and 9 per cent with it, versus 26 per cent and 16 per cent a year ago, respectively.

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

The company reported a profit of $3.2 billion for the three months that ended June 30. Analysts estimated $9.52 per share, according to research aggregated by Thomson Reuters.

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

Net income came in at $US3.2 billion, down from $US3.5 billion in the same quarter of 2017, largely due to the European fine. Last year, I wrote that the company doesn't expect to be paying such fines on a regular basis, but that's proven to be wrong this year.

The report said the smartphone operating system runs on more than 85 percent of the smartphones. Google says it will appeal the decision.




Including the fine, Alphabet still booked net income of 3.2 billion, which equals earnings of $4.54 per share.

The monster quarter came despite a regulatory backlash in Europe, rising questions about Google's massive data collection and clashes with advertisers over inappropriate content on YouTube.

"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.

Traffic acquisition costs, a key metric in Google's ad business, went up to 23% of ad revenue in the second quarter.

Investors reacted by sending Alphabet shares up by as much as 5.2 per to $1,274.16 in after-hours trading in NY.

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.

On the company's conference call, CFO Ruth Porat said, "One of the biggest opportunities for investment continues to be our ads business, where we're continuing to invest meaningfully". However we don't get to see the various segments of the business in these financials.

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