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Alphabet shares soar despite hit to profit from Google’s European Union fine

24 July, 2018, 21:37 | Author: Sara Gill
  • Why Google's secret attempt to settle with the EU Competitive Commission failed

The internet giant on Monday reported second-quarter profit of $3.2 billion even after accounting for the fine, imposed by the European Union earlier this month for abusing its market dominance On a per-share basis, the Mountain View, California-based company said it had net income of $4.54.

As expected, the company's net income was hurt by a record $5 billion antitrust fine imposed by the European Commission.

Shares of Google were up significantly after hours, rising 5 percent immediately after the numbers were released. At the heart of the European Union complaint is Google's reliance on bundling its own software into Android, which Europe's regulators say gives the company an unfair advantage.

Pichai said the company had opportunity to show ads on Google Home smart speakers and Google Maps and was slowly determining the best way to do so.

Google's results follow those of Microsoft, which reported a record quarter last Thursday, with a net income of $8.9 billion on revenues of $30.1 billion for the quarter ending June 30. Spending on Google Shopping search ads, which let marketers promote consumer products, increased 31 percent in the second quarter from a year earlier, according to data from digital marketing firm Merkle; those gains came even as Amazon revs up its own ads business. Google's advertising business grew 24 percent. Its effective tax rate reached 24 per cent, up from 19 per cent during the same period previous year. In the final minutes of trading on Monday, shares hit $1,211, a climb of 22 percent in the last 12 months.


Google will be able to effectively shrug off a $5 billion fine and still make close to $3 billion in a single quarter. Excluding the fine, the company would have had revenues of $32.6bn and a profit of $7.8bn.

Google is appealing the ruling, which found it abused its dominance in mobile software.

In a statement, Ruth Porat, chief financial officer of Alphabet and Google, said the company had delivered "another quarter of very strong performance". The company's other revenue bucket, which includes cloud, hardware and app sales, grew 37 percent to $4.4 billion in the second quarter.

Traffic acquisition costs, a key metric in Google's ad business, went up to 23% of ad revenue in the second quarter.

Alphabet's "other bets" saw a 49% jump in revenues from a year ago but they still lost money, with an operating loss of $732 million in the past quarter.

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