Alphabet beats estimates yet again, thanks to booming advertising business

By : |October 27, 2017 0

Alphabet reported strong third-quarter sales and earnings that topped analysts’ expectations courtesy strong growth in mobile search, programmatic advertising and smartphone use. Alphabet‘s shares were up nearly 3 percent at $1,020 in after-hours trading.

Third-quarter revenue for Alphabet, the parent company of Google, jumped 24 percent to $27.8 billion, above the average analysts’ estimate of $27.2 billion. Profits of $6.7 billion, or $9.57 per share, were also well ahead of estimates.

“We had a terrific quarter, with revenues up 24 percent year on year, reflecting strength across Google and Other Bets,” said Google‘s Chief Financial Officer Ruth Porat. Google’s “Other Bets” losses narrowed to $812 million for the quarter, compared to $861 million a year ago, with revenues coming in at $302 million, up from $197 million.

The third quarter was the 15th time in a row where the company showed double-digit sales, year-on-year growth. The advertising sales at Google account for vast majority of the revenue.

Google’s other revenue line which includes hardware such as the Pixel smartphones and Home speakers as the well as the cloud computing business, also enjoyed solid growth. Sales from non-ad businesses rose 40 percent from a year ago to $3.4 billion in the quarter. Google is also trying to take down Apple in the high-end smartphone business with the launch of Pixel series smartphones.

However, Google’s second generation Pixel smartphones had a rough debut with some customers complaining about a faulty screen and a clicking noise during calls. The company responded by doubling the warranty on the smartphone to two years and promising to fix the bug.

Capital expenditure rose to $3.5 billion in the quarter, from $2.8 billion, most of it spent on Google including on data centres, content acquisition for YouTube and hardware-related costs. During the quarter, Google signed a $1.1 billion smartphone deal with Taiwan’s HTC and released its latest Pixel phone.

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