Alphabet revenue climbs 20% in Q2 – shares trend down
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Alphabet revenue climbs 20% in Q2 – shares trend down

Alphabet reported strong earnings for the second quarter of the year, but investors did not like what they saw. Given the fact that the company beat expectations on both its top and bottom lines, this seems to be a clear case of Alphabet’s past catching up to it: Google has been so successful that even clear wins aren’t enough to live up to market hype.

Alphabet’s share price slid – but it’s still returned 23% year to date

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SOURCE: Yahoo Finance

Alphabet reported a revenue rise of 21%, year-over-year, to $26.01 billion. That’s a clear beat against analysts’ expectations of $25.64 billion. The company also returned GAAP earnings per share of $5.01 against expectations of $4.46. A big part of the success the company had here comes down to its “other revenues” – up to $3.09 billion from $2.17 in the year-ago quarter. According to Ruth Porat, Alphabet’s chief financial officer, Google’s cloud computing business and sales of its new Home smart speakers and wifi products were standout performers. She said:

“We’ve been talking about our bigger investment areas within Google and you can see the momentum here reflecting contributions from our newer revenue streams.”

Google’s more traditional areas of revenue generation also delivered handily – but not at the pace investors are used to. Net revenue for Google’s ad business (excluding fees paid to partners) was up by 16% in Q2 from the year-ago quarter. That’s impressive, no doubt, but it’s still a deceleration: last year, the figure rose 20% against its comparable period. This deceleration is reflective of the higher proportion of revenue Google now pays out to big partners who send traffic its way (like Apple’s iPhone).

The company’s net income fell from $4.9 billion in 2Q2016 to $3.5 billion this year. However, were it not for a hefty $2.7 billion fine imposed by European regulators, it would have risen substantially.

Disclosure

Dominion holds Alphabet in its Global Trends Ecommerce Fund. 


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