Despite a flurry of unsettling news reports and the resulting political fallout concerning Russian propaganda ads spread through Silicon Valley, it’s still very much business as usual at Alphabet’s Google unit. The parent company of Google and its many subsidiaries reported fiscal third quarter earnings today, coming in above analyst expectations in both sales and profit. It’s clear foreign government intervention has little to no effect on Google’s bottom line, even if it does pose a serious public relations disaster and tangle up Alphabet executives with a congressional hearing on the subject scheduled for next week.
Following the earnings announcement, Alphabet stock shot up around 3.5 percent. For the quarter, the company took in about $27.8 billion in revenue with a profit of $6.7 billion, or $9.57 a share. Analysts were expecting $27.2 billion on earnings per share of $8.34. As is the case every quarter, a vast majority of that revenue, more than 85 percent, comes from Google and its many multi-billion-user products and services, including search, Chrome, YouTube, Maps, Android, Gmail, and the Play Store.
Alphabet’s “Other Bets” category — which includes Nest, the X lab, and the many former X lab moonshots that are now standalone businesses — lost $812 million. That nearly billion-dollar quarterly expenditure is becoming a fixed occurrence with the Other Bets divisions. Alphabet has long treated its Waymo self-driving car unit and artificial intelligence research subsidiary DeepMind, among other teams, as far-off gambles with grand ambitions. Even as the company and its CFO Ruth Porat have moved to reign in spending in the less promising areas like fiber internet, modular smartphones, and drone delivery, its expected Other Bets will keep losing money for quite some time.
Of course, Alphabet has other, more pressing problems eclipsing its overeager spending on outlandish projects. Following a record $2.7 billion antitrust fine issued by the European Union this past June, the company’s search unit agreed to some of the antitrust commission’s guidelines and laid out plans to spin off its comparison shopping service to avoid further regulatory action. The company is also now in the middle of investigating a potential display defect affecting its new and positively reviewed Pixel 2 XL phone, tarnishing its otherwise successful and continued push into the original hardware game to compete with Apple, Samsung, and Amazon.
And lastly, Google is at the center of Russia’s tampering with the US election by way of internet propaganda. It was revealed earlier this month that the Russian government purchased tens of thousands of dollars of targeted ads on Google-owned products and services, believed to be a tactic to stir discontent and sow chaos during a politically sensitive time for the American electorate. Google’s general counsel, Kent Walker, is now slated to appear on Capitol Hill next week alongside representatives from Facebook and Twitter to discuss Russia propaganda and ad buying.
Not of these issues appear to be a drag on Google’s ability to dominate the web advertising industry. Still, that Google is spread thin across so many controversies, investigations, and product fumbles may sooner or later catch up to its lucrative ad business, either in the form of more antitrust inquiries or in its ability to compete against Facebook in the digital ad marketplace.