Google Cloud spurs Alphabet revenue growth
Tue 25 Jul 2017
Google’s parent company Alphabet has released its second quarter financial report, showing revenues of $26 billion, an increase of 21% on the same period last year. The strong performance comes in spite of a hefty fine from the European Commission in June this year.
The report illustrates the growth in particular areas of the business such as Google Cloud and Google Play. Listed in the report as ‘Google other revenues’, these aspects brought in more than $3 billion, a rise of 42% from Q2 2016.
It is understood that revenues from cloud services made up the majority of the ‘other revenues’ category. Alphabet CFO, Ruth Porat, noted that of the company’s 1614 new hires in the last quarter, the highest portion was in cloud services, but did not specify the exact amount.
Google CEO Sundar Pichai also said at the earnings announcement that the company’s cloud services arm made three times as many ‘large deals’ as it did in the same period last year. Pichai defined a large deal as being worth over $500,000.
Despite these burgeoning areas of growth, Google’s advertising revenue still dominates the figures, with $22.67 billion, compared to $19.17 in the same quarter last year.
Alphabet’s report highlights the impact of the record-breaking fine levied by the European Commission for anti-competition practices in June.
Net income before the fine was $6.2 billion, a rise of 27% on the same period last year. Taking into account the fine, however, meant net income dropped to $3.5billion, a significant fall from 2016.
Alphabet appears to be pleased with the results. “With revenues of $26 billion, up 21% versus the second quarter of 2016 and 23% on a constant currency basis, we’re delivering strong growth with great underlying momentum, while continuing to make focused investments in new revenue streams,” said Porat.
However, following the announcement, Alphabet shares dropped by 3% as investors noted the increased cost of traffic acquisition. Ben Schachter of investment firm Macquarie noted a ‘meaningful deceleration’ in net revenue, which he says illustrates the impact of Google having to share profits with mobile device manufacturers for their part in facilitating the search.