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Mobile, Video Ads Help Google Parent Alphabet Surge Profit


10/28/2016


Mobile, Video Ads Help Google Parent Alphabet Surge Profit
As Google parent Alphabet Inc showed it has honed its core business for the mobile era and is closing in on the next wave of computing, the search company bested analysts' estimates for third-quarter profit and revenue.
 
Marking the search giant's seventh straight quarter of double-digit revenue growth, the company’s net income climbed 27 percent to $5.06 billion and revenue jumped 20 percent to $22.45 billion, propelled by strong advertising on mobile devices and video site YouTube.
 
Pleasing investors who had been craving more after a $5 billion repurchase last year, the company authorized a $7 billion repurchase of its Class C stock.
 
Aimed to gain dominance in the fast-growing mobile advertising market, Google is competing fiercely with social network Facebook Inc. Google Chief Executive Sundar Pichai was bullish about recent product launches such as the Google Assistant, the Google Home smart speaker and refinements to the enterprise cloud business and touted the company's gains in the space.
 
Many analysts believe that voice search will succeed keyboards and touch screens as a primary way users interact with devices and the products are aimed at its rise.
 
"We feel well positioned as we transition to a new era of computing. This new era is one in which people will experience computing more naturally and seamlessly in the context of their lives, powered by intelligent assistants and the cloud," Pichai said in an conference call.
 
Beating expectations of $8.63 a share on revenues of $22.05 billion, according to Thomson Reuters I/B/E/S estimates, the company posted third-quarter adjusted earnings per share of $9.06.
 
Analyst Colin Gillis of BGC Partners said that the company's recent performance has reassured Wall Street that the transition is well underway even though Google has been dogged by concerns about how it would nudge its vast web advertising business toward mobile.
 
"It’s showing that even though they've hit lifetime highs, there’s still room to run," he said.
 
In the third quarter, there was a rise of 18.1 percent in advertising revenue, the company's lifeblood, to reach $19.82 billion. Compared with a rise of 29 percent in the second quarter, there was a rise of 33 percent in paid clicks, or ads for which advertisers pay only when users click on them.
 
There was however a drop of 11 percent in the latest period in the cost-per-click, or the average amount advertisers pay Google. However analyst Kerry Rice of Needham & Co said that since Google is suggesting suggests strong mobile growth, investors are willing to forgive the slump.
 
Pichai said that YouTube continued to post robust gains. In a format where advertisers are willing to pay a premium for a few seconds of users' undivided attention, Google, Facebook and Twitter Inc have all doubled down on video over the past year.
 
Analysts are eager for the company to tap new sources of growth as advertising accounted for 89.1 percent of Google's total revenue in the quarter.
 
Google's cloud business, which drove a 38.8 percent rise in the company's "other revenue" is one of the leading contenders.
 
"As we head into 2017, I expect cloud to be one of our largest areas of investment," Pichai said.
 
Google is trying to steal market share from industry leaders Amazon.com Inc and Microsoft Corp despite it being a relatively late entrant to the cloud business.
 
"I would hesitate to say they are competing head-to-head, but they are making up for lost ground," Rice said.
 
Chief Financial Officer Ruth Porat said during the call that primarily from Nest, Google Fiber and Verily units, Alphabet's "Other Bets" unit generated revenue of $197 million.
 
(Source:www.reuters.com)