NEW YORK--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.
"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 and other firms charge fees to distribute Google search on their devices and apps. 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.
