Alphabet revenues soar but profits dented by massive EU fine

25 Jul 2017

The Google campus in Silicon Valley. Image: Uladzik Kryhin/Shutterstock

Latest Q2 figures from Alphabet prove that the internet search advertising industry is still in rude health.

Alphabet has reported second-quarter sales of $26bn, up 21pc on last year.

The company reported a profit of $3.5bn, which would have been higher if not for the record $2.4bn EU antitrust fine levelled against it.

Future Human

“With revenues of $26bn, up 21pc versus the second quarter of 2016 and 23pc on a constant currency basis, we’re delivering strong growth with great underlying momentum, while continuing to make focused investments in new revenue streams,” said Ruth Porat, CFO of Alphabet.

The ABC of Alphabet’s momentum

Alphabet, the parent company of Google and YouTube, said that revenues from ‘other bets’ – such as driverless cars and other forays aimed at pushing the technology envelope – were up to $248m, compared with $185m a year ago. Losses in this area were down to $772m from $855m last year.

Google’s advertising revenues accounted for a large chunk of Alphabet’s overall earnings at $22.6bn, up from $19.1bn a year ago. Traffic acquisition costs (TAC) increased to $5bn from $3.9bn a year ago. Total TAC as a percentage of Google advertising revenue is 22pc.

The main danger Alphabet faces is that costs are rising faster than sales, and the company is already an anomaly for maintaining a frenetic growth rate relative to its size. Alphabet warned that expenses could continue to mount as more and more searches shift to mobile devices.

Google now has a global headcount of 75,606 people, up from 66,575 a year ago. The company, which was founded by Larry Page and Sergey Brin on campus at Stanford in 1998, is one of Dublin’s largest employers, with more than 5,000 people working on a fixed and contract basis.

In related news, Sundar Pichai, who has led Google as CEO for the last two years, has been appointed as the 13th member of Alphabet’s board, a move that represents a huge vote of confidence in him.

“Sundar has been doing a great job as Google’s CEO, driving strong growth, partnerships and tremendous product innovation. I really enjoy working with him and I’m excited that he is joining the Alphabet board,” said Page, CEO of Alphabet.

The Google Campus in Silicon Valley. Image: Uladzik Kryhin/Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years