Alphabet shares soar on second-quarter beat
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Alphabet shares soar on second-quarter beat

Alphabet, parent company of search giant Google, reported second quarter earnings at the beginning of the week, easily beating analysts’ expectations and providing a welcome distraction from the company’s recent fine. That fine, which amounted to $5 billion (a lot to you and I, perhaps, but barely pocket money in Alphabet’s world) is important to investors primarily because of what it signifies about the company’s business in the European Union (EU). However, analysts have been saying that Alphabet’s hold is strong enough that worrying is unnecessary. The company’s latest figures back them up.

Alphabet’s share price soared by 5% after results were announced

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SOURCE: Yahoo Finance

Revenue for the quarter came in at $32.66 billion – a significant beat against consensus estimates of $32.17 billion. Alphabet also saw strong performance when it came to earnings: for the quarter (and adjusted to compensate for the aforementioned $5 billion fine) Alphabet delivered $11.75 per share. Again, that’s a clear beat against the consensus estimates, which stood at $9.59.

Not everything is perfect in the world of Alphabet. In addition to the antitrust ruling against pre-installed Google apps on smartphones (the cause of the fine), the company saw higher capital expenditures (at $5.5 billion, that’s almost twice as much as last year), and a 24% rise in operating expenses to $10.9 billion. However, both of these increases were the result of inward investment in potentially lucrative areas: cloud computing and research and development.

As is usually the case, the majority of Alphabet’s revenue was delivered by Google’s advertising business, which net $28 billion over the quarter. That’s a 23.9% rise from the previous year, demonstrating that Alphabet’s major moneymaker is still growing at an incredible rate, and remains as profitable as ever. That last point will be of particular interest to investors who have been wondering how the EU’s GDPR will affect Alphabet. All in all, another great quarter from one of Silicon Valley’s most successful companies.

Disclosure

Dominion holds Alphabet in its Global Trends Ecommerce Fund.


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