Google's European Union fine drags down parent company's profits 28%

Ajustar Comentario Impresión

In the recent announcement of second quarter financial results, Alphabet, the owner of Google, exceeded expectations with strong results but suffered at the hands of its recent, record breaking European Union fine.

"I think people were hoping for a bigger beat on the top line, and we didn't get that", Ben Schachter, an analyst at Macquarie told Business Insider.

"Google's business is sustaining the highest levels of growth we've seen in around five years".

While the overall impression of the earnings report was mostly positive growth numbers, Google shares were nearly 3% down during the after-hours trading after most investors were unimpressed with the earnings report and due to the company's announcement that its expenses in acquiring more traffic for the website is set to grow higher in the coming months.

Google's "other revenue" segment is always an interesting one to look at, as that's where you'll find hardware like the Pixel phones and Google Home as well as the Google Play Store. Last year's second quarter earnings were reported to be $21.5 billion, while at the end of the same period this year the company was able to generate $25.1 billion regarding profits.

Pichai is responsible for Google's product development and technology strategy, as well as the company's day-to-day-operations. The firm said that revenues from advertisers on its own sites, such as YouTube and Gmail, and other sites together increased 18 per cent year-on-year to $22.7bn (£17.4bn). Google will generate $11.95 billion in display ad revenue worldwide this year, or 11.2% of total display spending. Google is also planning on updating the search functionality in its mobile application since most users now use the smartphones to perform the searches.

Google's cost of revenue for the second quarter also ballooned to more than $10 billion, up from around $8.1 billion in the second quarter past year.

Paid clicks on Google properties were up a whopping 61 percent year-over-year and 15 percent sequentially. Google has been a roaring success, but shareholders won't remain silent forever if the "Other Bets" projects remain in the red.

Google's parent company, Alphabet, just reported a $26 billion revenue despite a hefty EU Fine. Further, the fine could foreshadow some changes in the way Europe regulates Alphabet's display ads, and ultimately, reduce its revenue in this important market. Pichai is the CEO of Google Inc.