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Google profits soar despite $5B antitrust fine

24 July, 2018, 21:39 | Author: Shawna Walton
  • Margrethe Vestager1

Shares of Google parent Alphabet soared to all-time highs Monday evening, after the company posted a surge in ad revenue that partially made up for a record-breaking $5 billion fine from the EU.

While the European Union fine, announced last week as a penalty for abusing the market dominance of its Android operating system, did eat into profit, on an adjusted basis the company posted earnings of $11.75 a share, ahead of analyst estimates for $9.59.

Revenue was $32.7 billion, an increase of 26 percent over the same period a year ago.

Google faced a record European Union antitrust fine of 4.3 billion euros over its Android smartphone system, in a ruling that risks a fresh clash between Brussels and Washington.

The EU said Google had used the mobile operating system to illegally "cement its dominant position" in search.

Net revenue excluding TAC was expected to be at $25.6 billion.

The European Commission has demanded big changes to the Android platform, changes that once implemented could impact Google's huge gains in search revenues.

The company reported second-quarter profit of $3.2 billion US.

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. According to Commissioner Vestager, Google had sent its letter about a year too late. The pace is accelerating: it only took ~1 month to add the last million miles, vs. 2 mos from 6 million to 7 million miles and 16 months from 1 million to 2 million miles.

Google must now bring this conduct to an end within 90 days or face penalty payments of up to 5 percent of the average daily worldwide turnover of Alphabet, the EC said.

In a statement, Ruth Porat, chief financial officer of Alphabet and Google, said the company had delivered "another quarter of very strong performance". It is appealing the ruling.

"I'm confident we find a way to make sure Android is available at scale to users everywhere", Mr. Pichai said during the call with analysts. The company's other revenue bucket, which includes cloud, hardware and app sales, grew 37 per cent to US$4.4 billion in the second quarter.

Revenue in Alphabet's "moonshot" Other Bets category came in at $145 million with operating losses rising to $732 million.

Investors are also looking for signs of growth beyond advertising, such as Google's cloud-computing business.

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