Revenue at Alphabet’s Other Bets business rose 150 percent to US$185 million, while operating losses widened to US$859 million. In fact, Alphabet has missed Wall Street consensus estimates in eight of the past 12 quarters.
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Check back later for our full analysis on Alphabet Inc’s latest quarterly earnings report! That includes its earnings report in April, deemed such a disappointment that the stock fell 5.4% the following session.
For all of Alphabet and Google’s grand goals in researching how to change the world, the company’s revenues and profits are nearly entirely driven by the company’s advertising businesses.
Net income rose to $4.88 billion, or $7 per Class A and B common stock, from $3.93 billion, or $4.93 per share. Mobile ads are generally less expensive than desktop ads, so as the number of mobile ads has increased, Google’s cost per click has declined.
But with the exceptions of Apps, Commerce, Cloud, and hardware, these sub-segments of Google – and really Alphabet as a whole – primarily generate revenue from advertising. Assuming this growth continued at a similar clip in Q2, expect strength in mobile search – which Google began to enjoy given efforts to improve mobile ad formats a year ago – to continue representing a primary driving factor. Mobile has fueled Facebook’s growth, accounting for 84% of its $6.2 billion in second-quarter advertising sales.
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Despite the strong revenue growth, the falling cost-per-click on advertisements is cause for concern, said analyst Patrick Moorhead of Moor Insights & Strategy. Over the past year, Google, Facebook and Twitter have all doubled down on video, a format where advertisers are willing to pay a premium for a few seconds of users’ undivided attention. But Google has been spending massive amounts of time and money on its other bets, whether that’s laying cable for Fiber, building robots that the military could use through Boston Dynamics, beaming internet from weather balloons at Project Loon, or even trying to cure death at Verily.
