Shares of Alphabet rose after the its second quarter earnings announcement
The company’s earnings and revenue beat industry expectations
Investors were disappointed last quarter by Google’s decelerating revenue growth
Shares of Google’s parent company rose more than 9% after the company’s second quarter earnings beat industry expectations on Thursday. Alphabet said its board of directors approved a repurchase of up to an additional $25 Bn of its Class C capital stock.
The strong earnings came from higher ad sales – Google’s strongest money earner — and growth at its cloud unit, a high-margin business it is leaning more on to drive growth. Google reported advertising revenue of $32.6 Bn for the second quarter, compared to $28.09 Bn during the second quarter last year.
On the earnings call, Google CEO Sundar Pichai said the cloud business reached an annual revenue run rate of over $8 Bn. Google said in February 2018 that its cloud business was bringing in $1 Bn dollars per quarter.
Google recently installed a new cloud head, Thomas Kurian, who has been charged with growing the business and has already made some splashy acquisitions, including analytics company Looker.
Here are the key numbers:
- Earnings per share: $14.21 per share, up about 21%
- Revenue: $38.94 Bn up 19% from last year
- Traffic acquisition costs: $7.24 billion, which accounted for 22% of the company’s revenue
- Paid clicks on Google properties rose 28% from the same quarter last year
- Cost-per-click on Google properties fell 11%
Alphabet beat analysts’ expectations on revenue and EPS and had lower traffic acquisition costs (TAC) than analysts were hoping for. The metric represents the payments Google makes to companies like Apple for its search engine to be the default browser on their devices.
Google’s Upcoming Regulatory Issues
The news brought some cheer to Alphabet’s investors even as Google stands to face an antitrust review from the US’ Department of Justice of large technology firms. The increased scrutiny means that there may be more fines and restrictions placed on the company in the coming year.
The investigation follows the Federal Trade Commission’s $5 Bn fine over privacy lapses. The regulator’s order also mandates a privacy programme for Facebook-owned WhatsApp and Instagram, as well as its social platform.
Last time Google was in the FTC crosshairs for its anti-competitive actions was back in 2012. After a significant investigation, the FTC staff recommended major penalties and restrictions on Google and that the commission takes Google to court over violations of US law. At the time Google got a complete pass. However, competition regulators in the European Union have repeatedly pulled up Google over similar actions.
