Despite EU fine, Alphabet beats Q2 revenue and profit expectations
YoY growth remains highBy Rob Thubron
Alphabet may be one of the tech titans that some economists warn are getting too big, but despite the company's $600 billion+ valuation, the amount of money it makes continues to grow every year. The Google parent said Q2 2017 brought in revenue of $26 billion, up 21 percent compared to the same period a year earlier.
That figure marks the firm's second-best quarter ever; only the 2016 holiday quarter was better. And while the record $2.7 billion fine handed to Google by the EU commission put a dent in its profits, Alphabet still recorded operating income of $4.1 billion. It was noted that this figure would have been $6.8 billion, had European antitrust regulators not handed out the punishment.
As usual, the majority of Alphabet's revenue came from Google and its advertising business. The subsidiary's ad revenue rose 18.4 percent in Q2 to $22.7 billion.
There was a warning that traffic-acquisition costs (TAC) were rising and would remain high as more people moved to mobile searches. While this will benefit long-term revenue, it did affect operating margins more than expected. But Alphabet Chief Financial Officer Ruth Porat brushed off concerns. "As we've often said, we're focused on revenue and operating income dollar growth and not on operating margins," she said.
Revenue from Google's other products, which includes hardware such as the Pixel Phone and Google Home, along with the Play Store and its cloud business, was up 42.3 percent to $3.09 billion. Its employee headcount, meanwhile, reached 75,606, up by about 9000 from the same time last year.
Other Bets, which contains Alphabet's moon shots and its non-Google businesses - such as Waymo's self-driving cars, Nest, and Google Fiber - also saw a rise in revenue, though its 34 percent growth was down from the 150 percent it recorded last year. But the company will be happy to see operating losses for the division drop to $772 million from $855 million a year ago.
"We're delivering strong growth with great underlying momentum, while continuing to make focused investments in new revenue streams," said Porat.