Google's Parent Company Spends Like It's Thinking of a Future Beyond Ads

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Excluding a US$3.40 a share gain from the adoption of a new accounting standard, the Silicon Valley giant reported earnings of US$9.93 per share on revenue of US$31.1bn. Those same analysts were projecting revenues of $24.26 billion after stripping out traffic acquisition costs (TAC), and sales of $30.3 billion while leaving TAC in.

Many industry observers will be keenly tracking whether brand safety and consumer privacy controversies can dent the revenue momentum of companies like Google and Facebook. Revenues beat Wall Street consensus estimates by about $870 million, and earnings also beat analyst expectations.

"In 2017, they sold more devices than the previous two years combined", said Sundar Pichai, Alphabet's CEO, during the company's April 23rd, 2018 investors' call.

Advertisers also may limit ad-buying this year while sorting out their own compliance with the new European policy, known as General Data Protection Regulation, he said. It's no longer in "other bets", Google's so-called "moonshot" projects such as the self-driving vehicle unit Waymo, Google Fiber internet service and Verily life sciences unit, which report first-quarte revenue of $150 million and an operating loss of $571 million. At the end of last week, the grant was worth about $380 million, making it one of the largest single payouts to a public company executive in recent years, according to data compiled by Bloomberg. Alphabet's revenue was up 25.8% on a year-over-year basis.

As for Google's "other" business - non-ad divisions like Google Play and Google's cloud business - that raked in US$4.4bn in the first-quarter (1Q 17: US$3.2bn) and now accounts for nearly 20% of Google's total business. Google said traffic costs - or what it pays partner websites to generate advertising revenue - jumped 36% to $6.288 billion. It now will report impressions and cost-per-impression. Aggregate paid clicks were up 59 percent year over year and 8 percent sequentially. The higher spending shaved operating profit margins to 22 percent from 27 percent a year earlier.

About $2.4 billion in earnings were attributable to a new accounting method for unrealized gains in Alphabet's investments in startups such as Uber and Airbnb Inc.

As always, the company's results turn on its advertising business, still the vast majority of revenues.

And as RBC Capital Markets analyst Mark Mahaney recently penned, "Based on numerous discussions with investors, we believe the market may be underappreciating the regulatory risk facing Alphabet". Vetr lowered shares of Alphabet from a "sell" rating to a "strong sell" rating and set a $949.65 price target for the a report on Wednesday, January 10th. The Google segment includes principal Internet products, such as Ads, Android, Chrome, Commerce, Google Cloud, Google Maps, Google Play, Hardware, Search, and YouTube, as well as technical infrastructure and newer efforts, including Virtual Reality. Overall, Alphabet saw a rise 26% YOY rise in revenue to US$31.1 billion.



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