Google owner Alphabet Inc. beat expectations for third-quarter revenue on Tuesday, a positive sign that its advertising business is crossing new frontiers of tracking mobile users.
Through its search engine, YouTube video service, and partnerships on the Web, Google sells more Internet ads than any other company. Demand for its services grew over the past year as the pandemic forced people to spend more time online, and their new habits persisted.
Google advertising revenue grew 41% to $53.1 billion during the third quarter. Alphabet’s total sales among analysts tracked by Refinitiv rose to $65.1 billion, higher than the average estimate of $63.336 billion.
Shares fell 0.69% to $2,767 after financial results were released after hours.
Quarterly profit was $18.936 billion, or $27.99 per share, beating expectations of $24.08 per share and marking the third-straight quarter of record profit. Alphabet’s profit is subject to wide fluctuations because accounting rules require the company to measure unrealized profit as income from its investments in startups.
Concern by consumers about how Google and other companies use their browsing behavior to profile them and then which ads to show has become widespread. In the latest challenge, Apple Inc., whose iPhones account for half of smartphones in the United States, over the past few months gave its users more control to stop tracking. The change prompted advertisers to recalculate their spending in a way that Google rivals Snap Inc. and Facebook Inc. said hurt their third-quarter sales.
Google may have been less impressed because its search engine collects data on user interests that is valuable to advertisers and unmatched in the industry.
Google Cloud, which surpasses Amazon.com Inc and Microsoft Corp in market share, grew revenue 45% to $4.99 billion, slightly below estimates of $5.2 billion.
Alphabet’s total costs rose 26% to $44.1 billion in the third quarter and the company’s workforce size passed 150,000 employees.
Alphabet’s shares have outperformed several larger peers, rising nearly 57% since the end of last year. Microsoft is up 39%, Facebook 20% and Amazon 2% over the same period. But Alphabet’s shares trade at a slight discount compared to Facebook, the Internet’s No. 2 seller of online ads. Facebook is trading at 6.8x expected revenue over the next 12 months, compared to 6.4x for Alphabet.
Facebook has been flooded in recent weeks with allegations from a former employee who leaked thousands of company confidential files to the media and the US securities regulator over alleged misrepresentation of the company’s risks from hosting inappropriate content. Complaint was filed with
Google is stuck in some results. A YouTube policy official testified to the US Congress on Tuesday, along with other companies, about the harms of social media to young users.
Investors look forward to further changes in Google’s businesses as a result of an investigation into the company’s market power. The US and other authorities have alleged that some of the company’s practices in advertising and search are competitive, although the company argues that they are meant to benefit users. In a concession to critics last week, Google said it would cut some of the fees it collects from apps on its Play app store starting next year.
But the move could generate new revenue for Google if it starts selling subscriptions through its apps to companies like music streamer Spotify Technology SA and gives Google 10% to 15% of the amount.
Disclaimer: This post has been self-published from the agency feed without modification and has not been reviewed by an editor
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