Google Strength Drives Alphabet Profit Higher
October 27 2016 - 4:39PM
Dow Jones News
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)
Copyright (c) 2016 Dow Jones & Company, Inc.
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