Alphabet shares drop after it reports lower profit on huge EU fine
Google parent Alphabet earnings: $5.01 vs $4.49 expected EPS
Alphabet second-quarter profit is seen plunging on EU fine and wider 'moonshot' losses. Sales expected to surge on more YouTube, mobile search ads
Alphabet (GOOGL) reported a drop in second-quarter profit thanks to a $2.74 billion fine European antitrust regulators slapped on its Google unit.
Shares fell as much as 3% in after hours trading.
Here are the numbers:
EPS: $5.01 versus $4.49 expected
Revenue: $26.01 billion, up from $21.5 billion a year ago
Paid clicks: +52% from a year ago
Cost per click: (23%) from a year ago
The drop in cost per click -- the amount advertisers are paying each time a user clicks on an ad served by Google -- dropped 23%, much higher than the 15% analysts expected, according to StreetAccount.
Traffic acquisition costs amounted to $5.09 billion, higher than analyst estimates of $4.75 billion, as mobile search traffic carries higher costs than that from desktop users.
Still, the company said operating income excluding the EU fine rose 15 percent from a year earlier.
Alphabet CFO Ruth Porat said on a call with reporters that the company's capital expenditures reflected a pause in its expansion of the Google Fiber business.
Revenue jumped almost 21 percent from a year ago, more than the 19 percent rise Wall Street analysts expected.
The company's revenue growth was powered mainly by YouTube ads and mobile search ads, Porat said on a conference call with analysts.
Alphabet has been adding new content as it races Facebook (FB) and traditional TV networks for a share of the surging market for digital video ads.
YouTube said in June that it had reaches 1.5 billion monthly users and would add 12 new TV shows to the 37 it already has on its YouTube Red service.
The company is also updating its core search product as more consumers use its service via smartphones.
Still, its drive to innovate has run into a regulatory wall in Europe, where regulators ruled Google used its monopoly position in search advertising to hurt rivals by favoring its online shopping service over competitors, and fined the company $2.74 billion.
"There's a lot of follow-on risk associated with this" (EU fine) said Mark Mahaney, analyst with RBC Capital Markets, in an interview with CNBC before the results were released.
On Monday, the company added Google CEO Sundar Pichai to its board , which is already heavy with insiders.
The company added more than 1,000 workers during the quarter, most of them in Google's cloud business.
Class A shares of Alphabet are up more than 25 percent so far this year.
Source: Yahoo Finance
https://finance.yahoo.com/news/google-p ... 36575.html