Alphabet trounces profit estimates on ad sales surge

Traders work on the floor of the NYSE in New York

Google's dominance in online advertising has been challenged this year by the antitrust battle over its Android mobile software, which led to a $5 billion fine for the quarter, and other regulatory actions, including new European privacy rules. Google's traffic acquisition costs, which includes the money it pays to phone manufactures, like Apple, to use its services like search was $6.4 billion, or 23 percent of its advertising revenues.

According to a Mint report, profits of the second quarter in Alphabet reduced by 9.3 percent, to $3.2 billion. That was a little hire than the Thomson Reuters consensus estimate of $32.17 billion. And the company's investments in Cloud, Internet-connected Homes, and Autonomous Vehicles potentially set the company up for more years of premium growth & profits.

The internet search leader posted revenue of $32.66 billion United States in the period, up 26 per cent, driven by ad revenue from mobile searches. Pichai says the retailer "is migrating key areas of its business to the Google Cloud platform". Porat highlighted spending on sales and marketing for Google's cloud division, which is hosting its marquee conference later this week.

Google also appears to be emerging from a period of doubt surrounding the transition to mobile, where advertising revenue is harder to come by.

Alphabet shares have risen 15 percent since the beginning of the year, while the Standard & Poor's 500 index has risen 5 percent. "One of the unintentional consequences of GDPR is the strengthening of the duopoly", said Gil Elbaz, a former Google executive who now runs the marketing firm Factual.

The newer businesses are sucking up investments as Google adds data centers and employees to support them.

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"We delivered another quarter of very strong performance", chief financial officer Ruth Porat said.

Both Alphabet's headcount and taxes increased.

A new privacy law enacted by the European Union in May led the company to revise user privacy disclosures and clamp down on how it shares data with advertising customers. A new privacy law enacted by the European Union in May has had a minimal effect on Google's advertising business, and smartphone industry executives have described the European Union antitrust case over Android as too late to matter.

Alphabet trails Facebook, Amazon.com Inc and Twitter Inc in valuation as measured by the ratio of enterprise value to expected earnings.

Business Insider has contacted Google for comment.

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