AAPL Apple Inc

By Jack Nicas 

Google parent Alphabet Inc. reported rising third-quarter profit Thursday, extending a streak of strength as users spend more time on smartphones and advertisers spend more to reach them there.

Alphabet said net income rose 27% to $5.06 billion, or $7.25 a share, from $3.98 billion, or $5.73 a share, in the same quarter a year ago. Excluding certain expenses, Alphabet said it would have earned $9.06 a share, beating analysts' estimates of $8.62 a share, according to FactSet.

Alphabet revenue, driven almost entirely by its advertising business, rose 20% to $22.45 billion.

Shares of the company rose 2.3% to $814 after hours.

Alphabet -- the world's No. 2 company by market value, after Apple Inc. -- continues to grow at a steady clip on the back of the mobile revolution. Users are accessing the internet more because they carry computers almost everywhere they go. That shift to mobile boosts Google's business in other ways, too.

The company controls 95% of the mobile-search market, compared with 78% on personal computers, according to digital-marketing firm Merkle Inc., largely because it is the default search engine on both iPhones and Android devices. Mobile users also click on search ads at a higher rate than desktop users, Merkle said, in part because mobile ads take up virtually the entire screen for some searches. Some analysts now estimate more than half of Alphabet's revenue come from ads on mobile devices.

Alphabet shares have risen just 5% this year through Thursday's close, lagging rivals Facebook Inc. and Apple. Facebook, in particular, is proving a tough competitor for digital ads; its profits nearly tripled to $2.1 billion in the second quarter, with 84% of its $6.2 billion in ad revenue coming from mobile. Facebook reports third-quarter earnings next week.

There has also been tumult outside of Alphabet's core Google business, in the company's "other bets." On Tuesday, the head of Alphabet's high-speed internet business, Google Fiber, stepped down as the service said it would lay off 9% of staff and suspended plans in 11 cities. Top executives have also recently departed from Alphabet's home-automation firm Nest and projects to build self-driving cars, delivery drones and internet-beaming balloons.

Some of the shake-up comes amid a stronger focus on financials from Alphabet Chief Financial Officer Ruth Porat, who joined the company in May 2015 from Morgan Stanley. Alphabet executives have said she is leading an effort to rein in costs.

(END) Dow Jones Newswires

October 27, 2016 16:24 ET (20:24 GMT)

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