Google’s parent company Alphabet announced last night that it has posted a net profit of $3.2 billion on revenues of $32.7 billion in the quarter ending June 30. The results were a dramatic improvement over the year-ago quarter and were a reminder that the EU’s recent $5 billion antitrust fine, while dramatic, would not materially impact the firm.
“We delivered another quarter of very strong performance, with revenues of $32.7 billion, up 26 percent versus the second quarter of 2017,” Google CEO Ruth Porat said in a prepared statement. “Our investments are driving great experiences for users, strong results for advertisers, and new business opportunities for Google and Alphabet.”
What makes these results most impressive, perhaps, is that they include that $5 billion EU fine: Alphabet has already recognized the charge and is moving on.
Also delighting Wall Street, Alphabet has apparently lowered the expenses in the non-Google businesses in its portfolio. That said, these businesses netted about $500 million in losses in the quarter.
Which brings us, of course, to Google.
Built on the strength of its advertising empire, Google saw surprisingly strong growth. Key to this, the firm saw its traffic acquisition costs fall for the first time in three years. Key ad-driven services like Google Search and YouTube grew dramatically as well.
Google also appears to be emerging from a period of doubt surrounding the transition to mobile, where advertising revenue is harder to come by. Today, Google’s advertising business alone is responsible for 86 percent of Alphabet’s revenues. And Google, overall, is responsible for 100 percent of its profits (given the losses elsewhere).
Also interesting, to me at least, is the mix of revenues that Google derives from actual products and services vs. advertising. In the past, Google earned as much as 97 percent of its revenues from ads, but that number has been falling. This quarter, ads represented just 84 percent of Google’s overall revenues. In the year-ago quarter, ads were 86 percent.
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. So it appears that the firms are essentially neck-and-neck from an earnings perspective now, despite Microsoft’s incredible YOY gains: Factor out Google’s antitrust fine, and those results are nearly identical.