Alphabet Inc., Google’s parent company, showed strong results in its third-quarter earnings report, beating Wall Street’s expectations and sending after-hours trading up almost 3 percent at $1,020.
Bolstered by YouTube and mobile search ads, revenue reached $27.8 billion, growing 24 percent over the year before and edging out analyst estimates of $27.2 billion. Alphabet raked in $6.7 billion in profit, largely due to Google’s core advertising business, as well as new technology products and cloud-computing operations.
But in the competition for enterprise cloud services, a high-value big business often requiring data centers, Google has an uphill battle against Amazon Web Services, which is the leader in the space. Last February, when AWS went down for a few hours, the problem affected tens of thousands of websites and online stores, slowing them to a crawl or cutting them off altogether.
In response to numerous questions about Google’s “TAC,” short for traffic acquisition costs, and why it grew from 21 percent last year to 23 percent, chief financial officer Ruth Porat chalked it up to the shift to mobile. More people are accessing more Google services on devices like smartphones, and as time goes on, the company anticipates paying out an even bigger slice of ad sales to partners like Apple for integrating Google Search into their products.
For now, the third quarter treated the tech giants well, including Amazon, Microsoft, Intel and Google/Alphabet. (Apple’s next earnings call is scheduled for Nov. 2.) All four broke through Wall Street’s expectations, showing growth with new initiatives, devices and services, and boosting their shares after-hours.
“You’re clearly entering an era where you’re going to have different types of computing experiences,” said Sundar Pichai, Google’s chief executive officer, during the earnings call. “To do that, and stitch it all together across, I think it’s important that we thoughtfully put our opinion forward.”
Earlier this month the company unveiled a spate of new devices, including new Google Home speakers, a premium laptop-tablet Pixelbook, clip-on camera, smart ear buds and the latest Pixel phones, which may factor more heavily into revenue for the next quarter.
As for the last quarter, Google/Alphabet managed to cap a string of double-digit growth, year over year, for 15 consecutive quarters without major benefit of its newest product line.