Alphabet trounces profit estimates as costs come into check
By Paresh Dave and Arjun Panchadar (Reuters) - Alphabet Inc on Monday reported expenses from its Google search business were growing more slowly and that revenue from advertising and cloud computing rose faster than analysts anticipated, boosting its earnings beyond Wall Street targets and pushing shares up 3.6 percent after hours. Google's dominance in online advertising has been challenged this year by the antitrust battle over its Android mobile software and other regulatory actions. But the issues have yet to halt Google, which has grown quarterly revenue at least 20 percent year-over-year for two straight years
By Paresh Dave and Arjun Panchadar
(Reuters) - Alphabet Inc
Google's dominance in online advertising has been challenged this year by the antitrust battle over its Android mobile software and other regulatory actions.
But the issues have yet to halt Google, which has grown quarterly revenue at least 20 percent year-over-year for two straight years.
"There was never a question about Google’s dominance of a buoyant digital ads market," said analyst Richard Kramer of Arete Research.
The company has seen costs rise and profit margins dip as more searches and ads get shown on mobile devices, where Apple Inc
But growth in what the company calls traffic acquisition costs decreased for the first time in three years compared with the year-ago period.
Operating margin rose to 24 percent excluding a $5 billion antitrust fine, up from 22 percent last quarter, and down from 26 percent a year ago.
"Most impressive was that it looks like the headwind from traffic acquisition costs have started to ease," Atlantic Equities analyst James Cordwell told Reuters.
Adjusted earnings per share were $10.58, which beat the $9.52 average estimate in research aggregated by Thomson Reuters. Some analysts excluded other items as well, and Alphabet also beat that consensus of $9.59.
Alphabet said earnings per share were $11.75 before adjustments, which removes $1.1 billion in investment income from a new accounting standard for unrealized gains as well as the fine issued last week by the European Commission. Google is appealing the ruling, which found it abused its dominance in mobile software.
Alphabet's $32.66 billion in second-quarter revenue, 86 percent of which came from Google's advertising business, beat an average estimate of $32.17 billion.
A new privacy law enacted by the EU in May led the company to revise user privacy disclosures and clamp down on how it shares data with advertising customers. Google also has tweaked its comparison shopping service as it strives to comply with an EU ruling from last year, and it plans to soon release changes to how it handles political ads.
Alphabet, Facebook Inc
Still, Alphabet's outlook remains tempered by cost concerns, the analyst Kramer told Reuters.
"It's clear they are doing all they can to suppress profits and cash with their rising" capital expenditures, he said.
Alphabet trails Facebook, Amazon.com Inc
Cost increases have come across the enterprise. Government pressure to improve moderation of user-created content has forced Google to hire more analysts. YouTube, a Google-owned streaming service, has increased spending on video content to keep consumers from shifting to offerings from Netflix Inc
Amazon's encroachment into advertising has threatened Google's lucrative deals with media companies and advertisers.
At least three financial analysts who follow Google have said this year that separating its various advertising businesses in financial results would help investors understand how the competition is affecting the company.
Google, though, has increasingly linked together its services technologically through automated ad-buying tools that empower algorithms rather than humans to pick where ads are placed.
Macquarie Group senior analyst Benjamin Schachter wrote in a report this month that "we are approaching a point where we (and we believe The Street collectively) are not understanding the size of search vs YouTube vs programmatic, which may lead to increasing volatility" in share price.
Shares of Alphabet have gained 13 percent this year, compared with 16 percent for Facebook, 51 percent for Amazon and 76 percent for Twitter.
(Reporting by Arjun Panchadar in Bengaluru and Paresh Dave in San Francisco; editing by Patrick Graham and Lisa Shumaker)
This story has not been edited by Firstpost staff and is generated by auto-feed.
By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States
BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.