GOOGL Alphabet Inc

By Douglas MacMillan 

Sales keep soaring at Google parent Alphabet Inc., which also got an earnings jump-start from Uber Technologies Inc.

Alphabet's net profit surged 73% to $9.4 billion in the first quarter, up from $5.4 billion in the same period last year, boosted by a change in accounting rules which caused the company to begin reporting the current fair value of nonmarketable securities. That included the company's valuable stake in ride-hailing giant Uber, though it didn't break out individual holdings.

The earnings boost helped offset the rising costs Alphabet pays partners such as Apple Inc. to direct more smartphone users to Google's search engine. These costs have raised concerns that the company has to give up chunks of its revenue to maintain its level of growth.

"The advertising business that is not based the their home page search activity is growing faster, which helps their top line, but is lower margin," said Brian Wieser, an analyst at Pivotal Research.

Traffic costs reached $6.3 billion, up 35% from a year earlier and have made up one-fifth of the company's revenue for five consecutive quarters. On a call with analysts in February, finance chief Ruth Porat blamed the rise in these costs on mobile search and so-called programmatic ads, where Google places ads on partners' content -- which carry higher fees. She said some of these costs would ease after the first quarter.

The company's revenue, excluding payments to advertising partners, jumped 24% to $24.9 billion and surpassed estimates. Its shares were little changed in after-hours trading.

Google has maintained its huge lead in the global market for online ads despite its massive size and growing competition from fast-growing challengers. Google is expected to control 31% of the global ad market this year, down slightly from 31.7%, according to estimates from eMarketer.

Write to Douglas MacMillan at douglas.macmillan@wsj.com

(END) Dow Jones Newswires

April 23, 2018 17:16 ET (21:16 GMT)

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