3 Highlights of Alphabet’s (Google) Result Update

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Alphabet, the parent company of Google has reported that in the second quarter the expenses from its Google search business grew slower as compared to the prior corresponding period, while revenue rose and spiked more than the expectations and profits went above the targets of Wall Street. This led the shares of Google soar up 3.6 per cent as on July 23, 2018 and Google (NYSE: GOOGL) traded at a market price of $1211. Alphabet has thus witnessed quarterly revenue growth of at least 20 percent, year on year for the past two years.

Regulatory Updates: Google has also been under the regulatory pressure from regulatory authorities and European privacy rules as it is a dominant player in online advertising; and the antitrust battle has led to a $5 billion fine for the quarter. Google has been forced to hire more analysts because of the pressure by government to improve moderation of user-created content. In the competitive environment and offerings from Netflix and media conglomerates such as AT&T Inc., Google owned streaming service YouTube has increased its spending on all video-based content to avoid consumers from shifting.

Leadership Change: However, what is called the traffic acquisition costs, the quarterly growth rate for what the company pays ad partners, fell for the first time in three years. Google search has grown globally, and company is selling more ads as its YouTube video service. Cloud and AI services help google to craft ads better. Meanwhile, John Giannandrea, Google’s AI and Search Chief was recently hired by Apple while two other cloud and AI leaders have left Google over the past month. COO Diane Bryant of Google Cloud and Google’s Senior director of engineering, Shahriar Rabii was poached by Facebook to develop its new AI-focused chips.

Key Financials: Group’s second quarter revenue settled at $US32.66 billion with adjusted earnings per share of $US10.58. The company’s operating margin excluding the $5 billion antitrust fine issued recently by the European Commission over Google’s anticompetitive licensing of Android software, rose to 24 percent from 22 percent last quarter, however, the margin was overall down from 26 percent a year ago. The company’s net profit dropped from $3.5 billion to $3.2 billion because of the fine but latest result focuses on its operating results. Alphabet’s unit ‘Other Bets’ which features Google fiber provides broadband internet services in selected cities through-out the U.S. The shares of the company have also benefited from easing regulation concerns. While it is too early to measure the impact on all the fronts, the company has been moving on a cautioned path.

As consumers globally, and advertisers devote increasing attention to smartphone and TV apps instead of newspapers and traditional TV broadcasts, Alphabet and Facebook Inc and other leading application makers have become big forces in advertising. However, cost concerns are tempering into Alphabet’s outlook and Amazon.com Inc’s encroachment into advertising has endangered deals of Google with advertisers and media companies. Nevertheless, Google is a big giant that can keep knocking down many with its strategic moves. Google has seen a price change of $13.12 or a percentage rise of 1.1% as at July 23, 2018.

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