Alphabet, the parent company for Google, shook off recent worries about a slowing in its advertising business as it reported its fastest growth rate in two years and revenues and earnings well ahead of analysts' expectations.
The Google division, which makes up more than 99 per cent of Alphabet’s revenues, registered a 21 per cent jump in revenues to $21.5 billion, compared to the 17 per cent advance Wall Street had been expecting .
Recent evidence that it has made strides in capping its fast-growing expenses also continued in the latest quarter, lifting the company’s pro-forma operating profit margin by a percentage point, to 35 per cent.
The news fuelled a 5 per cent jump in Alphabet’s share price in after-market trading and dispelled some of the investor caution left after a disappointing slowdown in the preceding quarter.
Mobile Usage
Surging mobile usage continued to drive Google’s growth, with the number of times users clicked on its adverts, generating revenue for the company, climbing 29 per cent from the year before and matching the fast growth of the first months of the year. The lower pricing on mobile ads continued to weigh on its average cost per click, though the pressure moderated from the preceding quarter, with a decline of 7 per cent compared to 9 per cent in the first months of the year.
Google’s advertising revenue increased 19.5 per cent to $19.14 billion, while it notched an 29 per cent rise in paid clicks, where advertisers pay the company only if a user clicks on the advert.
Other bets
Revenue at Alphabet’s Other Bets business rose 150 percent to $185 million, while operating losses widened to $859 million. The division includes broadband business Google Fiber, home automation products Nest, self-driving cars and X - the research facility that works on “moon shot” ventures. Net income rose to $4.88 billion.
Ruth Porat, the chief financial officer of Alphabet, said: "Our terrific second quarter results, with 21 per cent revenue growth year on year, and 25 per cent on a constant currency basis, reflect the successful investments we've made over many years in rapidly expanding areas such as mobile and video. "We continue to invest responsibly in support of our many compelling opportunities."
Amazon sales
Meanwhile Amazon.com reported a better-than-expected rise in quarterly revenue, powered by growth in its cloud services unit and an increase in subscriptions for its Prime loyalty programme. The world’s biggest online retailer’s shares were up 2 per cent in after-hours trading on Thursday.
Amazon forecast current-quarter net sales of between $31.0 billion and $33.5 billion, factoring in sales from its Prime Day annual shopping festival. The company’s net sales in North America, its biggest market, jumped 28.1 per cent to $17.67 billion. Revenue from its cloud services business, Amazon Web Services, surged 58.2 per cent to $2.89 billion. This beat the average estimate of $2.83 billion. The unit, Amazon’s fastest growing business, is seen as the next driver of growth for the company. The company’s net sales rose 31.1 per cent to $30.40 billion in the second quarter ended June 30th. Net income rose to $857 millio from $92 million a year earlier.
(Reuters/FT/Bloomberg)
