Google’s Parent Alphabet Shares Soar After Topping Earnings Estimates
Alphabet, Google’s parent, posted a 21.3% increase in second-quarter revenue, exceeding analysts’ expectations, strong advertising sales on mobile devices and for video content.
The strong revenue growth suggests that Google is successfully navigating the transition to mobile, said Colin Gillis, an analyst with BGC Partners. Advertisers typically pay less for user clicks on mobile ads than on desktop ads, Google’s traditional strength, but the strong earnings performance suggest that is beginning to change, he said.
“They’re doing an excellent job of pulling the mobile landscape through to being more efficient,” Gillis said.
The company’s shares rose 5% to $804 in after-hours trading on Thursday.
consolidated revenue rose to $21.50 billion in the three months ended June 30, from $17.73 billion a year earlier. Analysts on an average were expecting revenue of $20.76 billion, according to Thomson Reuters.
ad revenue increased 19.5% to $19.14 billion, while it notched a 29% rise in paid clicks, where advertisers pay the company only if a user clicks on the ad.
Alphabet, which dominates the mobile ad market along with rival Facebook
, has been trying to beef up ad revenue from mobile and video businesses, both of which until last year were a little less profitable than its desktop business.
Despite the strong revenue growth, the falling cost-per-click on advertisements is cause for concern, said analyst Patrick Moorhead of Moor Insights & Strategy.
“Advertisers aren’t willing to pay as much for Google advertising,” he said.
Revenue at Alphabet’s Other Bets business rose 150% 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.
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Net income rose to $4.88 billion, or $7 per Class A and B common stock, from $3.93 billion, or $4.93 per share.
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Excluding items, the company earned $8.42 per share, beating analysts average estimate of $8.04, according to Thomson Reuters.