Equities Tech

Google shares rise as Q2 operating cost details impress

Google shares ended higher and surged in after-hours activity Monday, as parent company Alphabet released its second quarter earnings after the closing bell.

The results showed a slight decline in profits on a year ago, due to the recent $5 billion EU fine, but other elements were above expectations and impressed investors.

Google shares closed 1.10% higher at €1,2110, just ahead of the earnings release. The stock then surged over 4% in after-hours trading.

Google’s forecast beating ad performance

Google parent company Alphabet’s total Q2 profits hit $3.2 billion, just down from $3.5 billion a year earlier. However, excluding the recent EU fine, profits would have been $8.27 billion.

Despite the detraction of the recent fine, investors remain upbeat on the latest results due to other elements of the report.

Google’s Q2 ad revenues rose to $28 billion, up from $22.7 billion a year earlier. Meanwhile, its costs were also lower. Specifically, traffic acquisition costs as a proportion of revenues, fell to 71% from 72%.

“We delivered another quarter of very strong performance, with revenues of $32.7 billion, up 26% versus the second quarter of 2017 and 23% on a constant currency basis,” said Alphabet’s CFO, Ruth Porat.

“Our investments are driving great experiences for users, strong results for advertisers, and new business opportunities for Google and Alphabet,” she added.

In a call to discuss the earnings in more detail with analysts, Porat also said that once again, that mobile search was the lead generator of activity.

Outlook details

Alphabet’s CFO said the outlook was generally strong and that they are pleased with current momentum of the ad side of the business.

Porat also warned that while expenses had been relatively low so far this year, Q3 is traditionally a more expensive period for the tech giant, amid the arrival of new graduate talent.

CEO Sundar Pichai, meanwhile, was upbeat on the call and outlined numerous new developments and successes achieved by Google in just the past three months.

Pichai also picked out Google Cloud’s progress and that its proving incredibly popular with businesses of all sizes, around the world.

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