Alphabet Shrugs Off European Fine Thanks To Strong Ad Sales

Google’s parent surprises Wall Street with strong growth, despite stiff penalty from the EU over Android

Google’s parent organisation Alphabet has pleased investors after it recorded strong growth despite a number of challenges facing it.

Profits at the company declined sharply, mostly as a result of having to account for the record fine of 4.3 billion euros (£3.83bn) for its Android mobile operating system, a decision against which it is appealing.

Last week the European Commission decided that Google has used Android as a vehicle to cement the dominance of its search engine. That fine dwarfed last year’s 2.4bn euro (£2.2bn) European Commission fine related to Google’s online shopping search feature.

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Strong growth

Alphabet is also having to contend with the implementation of the new GDPR data protection rules as well.

Yet despite these challenges, it is clear the firm is firing on all cylinders.

For the second quarter ending 30 June, Alphabet posted a net profit of $3.2bn (£2.4bn), down from $6.3bn (£4.8bn) in the same year ago quarter.

It should be noted that Alphabet would have made a profit of $8.3bn (£6.3bn) if it didn’t have to absorb the Android and online shopping penalty from the European Union.

There was equally good news on the revenue side, after sales rose to $32.6bn (£24.9bn) from $26bn (£19.8bn) a year earlier.

What really pleased investors is that 86 percent of the $32bn in quarterly revenue came from Google’s advertising business, beating an average estimate of $32.17bn (£24.5bn).

The rest of the revenue came from Google’s non-advertising related businesses. This includes selling gadgets, app, cloud services etc.

It should be noted that its quarterly revenue has grown at least 20 percent year-over-year for two straight years.

Alphabet’s share price reportedly rose over 6 percent in after hours trading, as investors were cheered by the strong performance.

Advertising strength

Indeed, Google’s advertising business grew a staggering 24 percent over the quarter.

“We delivered another quarter of very strong performance, with revenues of $32.7 billion, up 26 percent versus the second quarter of 2017 and 23 percent on a constant currency basis. Our investments are driving great experiences for users, strong results for advertisers, and new business opportunities for Google and Alphabet,” said Ruth Porat, CFO of Alphabet and Google.

As mentioned earlier, Google does have to contend with the European penalties going forward and the GDPR.

But it is also facing pressure from Western Governments to crack down on extremists on Youtube, its video-sharing service that is facing a stiff challenge from the likes of Netflix.

But the firm remains undaunted.

Last week Google launched its jobs search service in the UK, a year after it debuted in the US, with listings from a number of major recruitment services.

It also signed the first deal of its moonshot project that will see it beam high speed internet into large rural regions of an African country from the upper atmosphere.

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