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Comments Off on Mobile and Video Drive Alphabet’s Quarterly Results

Mobile and Video Drive Alphabet’s Quarterly Results

Posted by Admin | October 28, 2016 | Telecoms

Revenues and earnings at Google parent beat expectations

Google suffered less of an advertising slowdown than expected in its latest quarter, as a surge in mobile and video pushed revenues and earnings at its parent, Alphabet, ahead of expectations.

The internet company’s advertising business had been expected to decelerate after strong growth in the previous quarter, particularly since the latest results faced a tough comparison with a solid year-ago period that saw new mobile advertising formats.

The number of times users clicked on ads on Google’s own sites in the third quarter soared 42 per cent from a year before, as mobile ads boomed. Even with an 11 per cent decline in the average cost per click, the surge in volume was enough to drive gross revenue up by 20 per cent to $22.45bn.

The robust performance of Google’s mobile business this year has eased some of Wall Street’s worries about an inevitable deceleration as it grows. Its growth rate in the second quarter of 2016 bounced back to the highest in more than two years, prompting a rally that drove Alphabet’s share price to a new record high at the beginning of this week.

The latest period was almost as strong, with revenue growth — after stripping out the effects of currency changes — of 23 per cent close to the preceding quarter’s 25 per cent. The UK vote to leave the EU was a big factor in the currency hit, as an 18 per cent revenue advance in sterling translated into only a 5 per cent increase in dollar terms to $1.9bn.

Google’s growth surge has been accompanied by a jump in costs, with higher data centre expenses and the costs of acquiring content for YouTube pushing up the company’s “other cost of revenues” line by 29 per cent in the latest quarter to $4.2bn. Its typical third-quarter hiring binge also produced a 30 per cent increase in stock-based compensation to $1.9bn.

Two of the company’s big initiatives this year, expanding its cloud business and launching a smartphone and other new hardware products, have pushed it into more direct competition with Amazon and Apple and capped profit margin expansion.

Ruth Porat, chief financial officer, suggested that the short-term outlook for higher margins remained limited. “We do remain committed to investing in this growing set of opportunities,” she said. Meanwhile, the company claimed some success from recent investments, with the cloud business the biggest single factor behind a 39 per cent jump in “other revenues” to $2.4bn.

Alphabet’s “Other Bets” generated revenue of $197m, an increase of 40 per cent. But these businesses, which include the Nest smart home division and Google Fiber, still contribute less than 1 per cent of overall group revenue. Losses from Other Bets dropped 12 per cent to $865m.

Overall, Alphabet reported net revenue, after deducting traffic acquisition costs paid to other companies, of $18.27bn, ahead of the $18bn most analysts had expected. Pro forma earnings per share of $9.06 topped the $8.63 Wall Street had been anticipating. The company also announced a new share buyback of $7bn, the second it has carried out following the completion of its first $5bn plan.

Source: ft

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