Alphabet Stock Skyrockets on Stellar Earnings Despite $5 Billion E.U. Fine

The results are likely to see Alphabet gain on Amazon and Apple in the race to become the first trillion dollar company
Credit
ELIJAH NOUVELAGE  AFP

The results are likely to see Alphabet gain on Amazon and Apple in the race to become the first trillion dollar company Credit ELIJAH NOUVELAGE AFP

The Google parent reported better-than-expected second-quarter profits and revenue on Monday - despite the company's recent $5 billion antitrust fine levied by the European Commission.

In the same quarter past year, Alphabet reported earnings of $8.90 per share, excluding a $2.7 billion regulatory fine the European Union imposed on the tech giant. At the heart of the European Union complaint is Google's reliance on bundling its own software into Android, which Europe's regulators say gives the company an unfair advantage.

A majority of the revenues came from its search engine and the YouTube video streaming website, with revenues totaling $32.5 billion.

European authorities ordered Google to stop effectively requiring phone-makers in Europe to install Google's search engine and Chrome internet browser on their devices in order to use the Android software. "There is regulatory risk, though we have yet to find evidence that regulations will adversely impact the usefulness of Google for consumers or advertisers". Its effective tax rate reached 24 per cent, up from 19 per cent during the same period a year ago.

Investors welcomed the news enough to push Alphabet's stock up to an all-time high of $1,265 a share late Monday, valuing the stock at around $875 million.

Alphabet today reported $32.7bn in revenues in the three months to June 30, up 26 per cent compared to Q2 2017, and 23 per cent in terms of constant currency.

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In this May 3 file photo, Toronto Raptors guard DeMar DeRozan reacts at the end of a playoff loss to the Cleveland Cavaliers . I'd expect that line to move further tomorrow, as the conference and division lines were very slow to react to today's news.

But it's important to remember that simply paying the fine - if Google loses its appeal - doesn't make the problem go away.

Last week, we told you that Google had been fined the princely sum of $5.04 billion by the EU.

"We delivered another quarter of very strong performance", said Alphabet Chief Financial Officer Ruth Porat.

Also delighting Wall Street, Alphabet has apparently lowered the expenses in the non-Google businesses in its portfolio.

Other tech giants Amazon and Facebook will report quarterly results later in the week. The company's other revenue bucket, which includes cloud, hardware and app sales, grew 37 percent to $4.4 billion in the second quarter. Pichai says the retailer "is migrating key areas of its business to the Google Cloud platform".

Alphabet's "other bets", investments in less established ventures like Calico, Fiber, Nest, Verily, and Waymo, posted an operating loss of $732m, about $100m more than the year-ago quarter, on revenue of $145m.

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