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Alphabet earnings: even with massive EU fine, Google keeps minting money

Alphabet earnings: even with massive EU fine, Google keeps minting money


Regulators can’t hold me down

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Photo by Kimberly White/Getty Images for Fortune

Alphabet just reported its second quarter earnings for 2017, and the numbers were as expected. The advertising business built around Google, Android, and YouTube continues to account for the vast majority of the revenue and all the profit. The company, despite its massive size, continues to grow revenue at a double-digit rate on a year-over-year basis. And while it’s true that profit was down a bit this quarter, that’s only on account of a one-time, $2.7 billion fine levied by regulators in the European Union.

For the first three months of this year, Alphabet reported just over $26 billion in revenue, up 21 percent from the same period last year. Without the EU fine, it would have notched $6.87 billion in operating income, up around 15 percent from the second quarter of 2016. With the punishment, Alphabet managed a very respectable $4.1 billion in operating income.

Other Bets, the division that contains Alphabet’s moon shot projects, saw its revenue increase to $248 million, which is up about 34 percent over the same period last year. Just as importantly, the losses stemming from Alphabet’s experiments went down, declining to $772, a drop of around 10 percent.

“We're delivering strong growth with great underlying momentum, while continuing to make focused investments in new revenue streams," said Ruth Porat, chief financial officer of Alphabet.

On its earnings call, Porat called out Google’s hardware efforts as a major source of new revenue growth. The two products name dropped were Google Home and WiFi. The other sectors highlighted were Cloud and Play. Overall, Google’s “other revenues”, the business lines outside advertising, grew around 50 percent on a year over year basis this quarter. Of course, it is growing from a much smaller base. Other revenue is now just over $3 billion, compared with $22.7 billion in advertising revenue.