Google: stellar sales, significant spending
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Google: stellar sales, significant spending

Silicon Valley Titan Alphabet has reported its first quarter earnings, and, as usual, the bottom line is all about Google. Here’s what you need to know in brief: it was a great quarter that saw Google post the strongest its strongest sales figures in almost four years. But the company also spent “at historic levels” and is committing to more of the same. This is a clear sign that Alphabet realizes the strength of its competitors and is pushing hard to take the lead out in front of them.

Alphabet’s share price has risen by 22% over the past year

graph 2604 google

SOURCE: Yahoo Finance

Alphabet beat the Street’s expectations on the top and bottom lines. Earnings per share came in at $9.93 against expectations of $9.28; revenue for the quarter stood at $31.15 billion, while analysts had predicted a figure of $30.29 billion; and operating income came in at $7 billion verses $6.6 billion in the year-ago quarter.

Google’s ad sales drove the company in the first quarter of 2018. They accounted for $26.64 billion – up nearly 20% year on year – showing signs that, despite the furor over online advertising and privacy, Alphabet is seeing no shortage of demand. Its “other revenues” came in at $4.3 billion.

Google doesn’t break out its cloud computing arm separately in figures, but we know from the fourth quarter of 2017 that it’s a billion-dollar per quarter business. CEO Sundar Pichai also gave investors on the earnings call a hint when he said Google is signing “significantly larger, more strategic deals.”

The big news for many people, however, is how much Alphabet is spending. Operating expenses for the quarter came in at a whopping $10.7 billion, 27% up from the same period last year. According to chief financial officer Ruth Porat, this is primarily being spent on research and development. This is likely to continue: the company is competing with all of the major players in Big Technology. Facebook (online advertising); Apple (smartphones); Amazon (cloud computing) and even Netflix (now that YouTube is offering its “YouTube Red” streaming subscription service).

According to Google, investors don’t have to worry about next month’s new data regulations in the EU. Google’s spent 18 months making sure it’s compliant. Disclosure Dominion holds Alphabet in its Global Trends Managed and Ecommerce Funds.

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