Alphabet drinks profit estimates because Google has costs

reported Monday that spending on its Google search activity increased more slowly in the second quarter while revenues grew faster than badysts had anticipated, increasing earnings above Wall's objectives Street and increasing by 3.6%.

Google's dominance in online advertising was questioned this year by the antitrust battle over its Android mobile software, which resulted in a $ 5 billion fine for the quarter and other regulatory measures .

Government pressure to improve the moderation of user-created content has forced Google to hire more badysts. YouTube, a Google-owned streaming service, has increased its spending on video content to prevent consumers from switching to offers from Netflix Inc and developing media conglomerates such as AT & T Inc.

These problems have not yet stopped Alphabet, which has increased its quarterly revenues by at least 20% from one year to the next for two consecutive years.

"There has never been a question about Google's dominance of a dynamic digital advertising market," said Richard Kramer badyst Arete Research.

The quarterly growth rate of advertising partner compensation, called traffic acquisition costs, fell for the first time in three years, which Atlantic Equities badyst James Cordwell described as the result of the more impressive

. Google CEO Sundar Pichai told badysts that investing in artificial intelligence software to better predict where to place ads makes his services more attractive to advertisers. The company sells more ads because its YouTube video service and Google search are growing globally, he added.

Profit margins have declined as more and more ads are being broadcast on mobile devices, Apple Inc. and other companies charging Google search distribution fees on their devices and applications.

But Google in the second quarter entered the second year of its latest multi-year agreement with Apple, which badysts said helped to equalize costs.

Operating margin went from 22% in the last quarter to 22% of the $ 5 billion anti-trust fine issued last week by the European Commission over Google's anti-competitive licenses for Android software. The margin was down 26% a year ago.

Net profit went from $ 3.5 billion to $ 3.2 billion, due to the fine, but badysts focused on operating results.

Adjusted earnings per share was $ 10.58, excluding fine and the effects of other investments. Analysts have estimated $ 9.52 per share, according to an aggregate study by Thomson Reuters. Some badysts have also ruled out other items, and Alphabet also broke that consensus by $ 9.59.

Alphabet's $ 32.66 billion business figure in the second quarter, of which 86% comes from Google's advertising activities, exceeded the average forecast by $ 32.17 billion .

The rest of the revenue comes from Google's non-advertising activities, which include the sale of apps, gadgets and cloud services, as well as Internet services.

New businesses invest and employees to support them. But Alphabet's chief financial officer, Ruth Porat, told badysts Monday that the ad unit was also receiving new capital.

Alphabet, Facebook Inc. and other major application manufacturers have become major consumers of advertising as consumers, and advertisers are paying more and more attention to applications smartphone and TV.

Pichai said the company had the ability to run ads on Google Home's smart speakers and on Google Maps and that it was slowly determining the best way to do it.

The company's shares benefited from a relaxation of regulatory concerns. A new privacy law promulgated by the EU in May has had a minimal effect on Google's advertising activities, and smart phone industry executives have called the antitrust case the # 1 39; EU of Android too late. The company warned that it was too early to measure the impact on both fronts.

But the prospect of Alphabet is tempered by cost concerns, and the encroachment of advertising from Amazon.com Inc. has threatened Google's lucrative deals with companies of media and advertisers.

] in the evaluation, measured by the ratio between the value of the company and the expected benefits. Its business value, market capitalization and debt minus cash, is trading at 13 times expected earnings for the next 12 months, compared to about 14 times for Facebook, 24 times for Twitter and 26 times for Amazon, according to the TR data.

(Reportage by Arjun Panchadar at Bengaluru and Dave Paresh in San Francisco, edited by Patrick Graham and Lisa Shumaker)

(This story was not edited by Business Standard staff and is generated automatically from a feed.)