Google owner Alphabet's profits drop after $5bn fine but shares surge

Google accounts for the overwhelming majority of Alphabet’s revenue and profits

Shares in Google parent Alphabet jumped in after-hours trading Monday as the company's second-quarter results exceeded Wall Street forecasts after taking into account a $5 billion U.S. charge levied by European regulators. Excluding that amount, the Mountain View, California, company's earnings came to $11.75 per share, which topped the $9.45 per share expected by analysts surveyed by Zacks Investment Research.

But it's important to remember that simply paying the fine - if Google loses its appeal - doesn't make the problem go away. Without accounting for the fine, the company's net income for the three months ending June 30 was $8.27 billion, compared to $3.5 billion a year ago. Today, Google's advertising business alone is responsible for 86 percent of Alphabet's revenues. "That's going to raise more and more questions about Google's business". Factoring out traffic-acquisition costs, revenue totaled $26.2 billion, above the $25.6 billion analysts had expected.

Business Insider has contacted Google for comment.

Alphabet generated revenue of $32.66 billion during the second quarter of 2018, compared to $26.01 billion during the same quarter past year.

In a statement, Ruth Porat, chief financial officer of Alphabet and Google, said the company had delivered "another quarter of very strong performance".

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Alphabet, Facebook Inc and other leading application makers have become big forces in advertising as consumers globally, and in turn, advertisers devote increasing attention to smartphone and TV apps instead of newspapers and traditional TV broadcasts. According to a report published today, Google's secret attempt to settle with the European Union failed because the company waited too long to offer a settlement plan.

Investors reacted by sending Alphabet shares up by as much as 5.2 per to $1,274.16 in after-hours trading in NY.

During its earnings call, CEO Sundar Pichai declined to answer any questions about how the EC's fine would impact its mobile business.

Alphabet's "other bets" saw a 49% jump in revenues from a year ago but they still lost money, with an operating loss of $732 million in the past quarter.

Alphabet has also branched out into a range of other areas, including cloud computing, YouTube and driverless cars.

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