Alphabet earnings smash expectations as costs fall
Google’s parent company, Alphabet reported impressive underlying earnings for the second quarter thanks to a surprise drop in costs, though the bottom line was dented by a $5bn antitrust fine from the European Commission earlier this month.
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07:30 15/05/24
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07:30 15/05/24
Excluding the fine, Alphabet’s earnings would have been $8.2bn, or $11.75 a share, above the analysts’ consensus estimate of $9.64 a share. Taking into account the fine, the earnings fell to $3.1bn.
Revenue $32.66bn for the quarter were 25.5% higher than last year's and just ahead of the $32.17bn consensus estimate compiled by Reuters.
The large gap between expectations and results was due to an extra $1.06bn the company reported as gains in securities, as it continues to factor in increases on its outside investments under new accounting rules.
In the first quarter, Alphabet's investments gained over $3bn, with the $1.06bn reported the total gains for the company’s investments in the first semester account for nearly one-third of Google’s GAAP net income figure for the period.
Ruth Porat, Alphabet financial director said: “Our investments are generating great experiences for users and new business opportunities for Google and Alphabet”.
The stock rose over 5% after-hours, and settled to about 3.2% up following the company's earnings call. The shares are listed at $1.240, if they are maintained until market open it would mean a new record high for the company.
It wasn’t just the headline figures impressing traders, but also a surprise drop in costs, said market analyst Jasper Lawler at London Capital Group.
"Costs had been increasing at a concerning rate over previous quarters as Alphabet played catch up in areas such as developing its cloud business and consumer business. These higher costs had been squeezing margins causing concern particularly among short term traders. Unexpectedly lower costs have eased these fears, boosting demand for the stock in the process."