Wed, Jul 25, 2018 - Page 10 News List

Despite EU curbs, Google buoyed by robust results

Bloomberg

Google executives projected confidence in Android and other businesses, giving investors no signal that a costly regulatory crackdown in Europe would curb sales and profit anytime soon.

Parent company Alphabet Inc posted second-quarter results that walloped analysts’ expectations, while CEO Sundar Pichai hinted at new untapped advertising opportunities and highlighted growth at video service YouTube and the cloud arm.

The monster quarter came despite a regulatory backlash in Europe, rising questions about Google’s massive data collection and clashes with advertisers over inappropriate content on YouTube. That had quelled analysts’ expectations ahead of the results on Monday.

Alphabet reported two different profit figures to account for a record US$5 billion fine Europe imposed last week for violating competition law with Google’s Android mobile software. Excluding that, Alphabet said profit was US$11.75 a share.

Google plans to contest the ruling. Even including the record fine, the company generated US$3.2 billion in net income during the second quarter.

On the earnings call, Pichai suggested the company would not dramatically alter its Android strategy.

“I’m confident that we can find a way to make sure Android is available at scale to users everywhere,” he said.

Google gives Android to smartphone makers for free, part of the reason it is the most popular mobile operating system.

Pichai’s comments suggest the company will continue the approach.

Google also shrugged off the General Data Protection Regulation, a European privacy law that started in May and limits targeted advertising.

“There do not appear to be any signs that should cause a meaningful slowdown any time soon, as fines from the European Commission are not likely to hamper Alphabet’s growth rate,” Brian Wieser, an analyst at Pivotal Research Group, wrote in a note to investors. “Conversely, regulatory changes such as GDPR in Europe (and similar laws implemented elsewhere) could have the effect of reinforcing Alphabet’s growth.”

Google has continued to give search ads more prominent space on mobile phones and bundle more of its ads products together, helping to fuel the brisk sales growth.

Chief financial officer Ruth Porat suggested that the company would not sacrifice investment in its cash cow of advertising in favor of other bets like autonomous cars and delivery drones.

“One of the biggest opportunities for investment continues to be in our ads business,” Porat told analysts on the earnings call. “I don’t want to leave you with the notion that the investment is just going to the new businesses.”

Google’s advertising business grew 24 percent, pushing total Alphabet revenue, minus partner payouts, to US$26.24 billion during the second quarter.

Analysts were expecting US$25.55 billion, according to data compiled by Bloomberg. Those gains came even as Amazon.com Inc revs up its own ads business.

Pichai highlighted rising use of the company’s digital maps, particularly in emerging markets. He said Google is exploring more ways to insert promoted slots and ads into its Maps service, which has had limited commercial applications to date.

A larger share of Google’s ad dollars went to its own digital properties, including the search engine and YouTube, rather than outside Web sites that run its ads. Google properties revenue jumped 26 percent to US$23.3 billion.

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