Alphabet Profit Jumps Amid Threats -- WSJ
July 26 2019 - 3:02AM
Dow Jones News
By Rob Copeland
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 26, 2019).
Google became the latest technology titan to shake off new
threats, delivering strong earnings ahead of looming regulatory
peril.
The search giant's parent, Alphabet Inc., reported revenue of
$38.9 billion, up 19% over the same period last year, and $9.2
billion in profits. While that marks slower growth than usual for
the Silicon Valley mainstay, it beats bearish analyst
prognostications stemming from the company's unusual earnings miss
a quarter earlier.
The results highlight Google's resilience in old-school internet
search, where its dominance remains nearly absolute. Time and
again, the franchise has come through for Google as forays into
tertiary areas disappoint. Analysts expect Google to continue to
pack ever more ads into areas like Maps and YouTube to keep gassing
growth, and Thursday's results demonstrate the rewards of those
efforts.
Google also took limited steps toward more disclosure --
anathema at a company that still doesn't detail the financial
performance of its YouTube unit some 13 years after acquiring the
online-video powerhouse.
Google executives said that the laggard cloud business was on
track for $8 billion in annual revenue, though they didn't say
whether it was profitable. On capital expenditures, typically a
financial black box, Google detailed an increasing proportion of
spending on office costs as it continues to expand rapidly
world-wide.
Alphabet stock is the worst-performing this year among large
tech peers. Shares bounced back after hours Thursday, up 9%, making
up more than half of its loss since last quarter's disappointing
showing.
At 21 years old, Google is hardly a technology up-and-comer any
longer, and this year a series of colliding challenges threaten to
take a toll. Advertising growth is slowing in the long term,
pinched by rising competition and costly changes to important units
like YouTube.
Meanwhile, efforts in unproven areas like cloud and hardware
bleed resources. Alphabet has earned $63 billion in the last three
calendar years, providing plenty of grist for misadventures. Its
24% margin marks a minor drop from the 25% clip of a year
earlier.
The earnings continue a streak of heady results for Silicon
Valley's best-known technology companies amid mounting scrutiny
from consumer advocates and international regulators.
Facebook Inc. reported strong results on Wednesday just hours
after the announcement of a privacy settlement with the Federal
Trade Commission that included a $5 billion fine. Microsoft Corp.,
the world's most valuable listed company, last week reported record
quarterly revenue and profit. Amazon.com Inc. posted strong sales,
too, on Thursday, with revenue rising 20%, but ended its streak of
four consecutive quarters of record profits.
Alphabet and Amazon are among the companies on which the Justice
Department has turned its focus. The agency this week announced a
broad antitrust review into whether the world's biggest technology
firms are stifling competition. Google is also expected to soon pay
a settlement with the FTC over allegations that YouTube violated
laws governing the use of children's data, people familiar with the
matter say.
As is their customary practice, Google executives took a
roundabout route through the company's quarterly earnings call,
going 52 minutes into the 58-minute call before Chief Executive
Officer Sundar Pichai mentioned the regulatory stew. Unlike
Facebook, which on Wednesday disclosed the Justice Department and
FTC investigations, Alphabet hasn't formally acknowledged either
probe.
Instead, Mr. Pichai spoke more generally about regulatory
scrutiny. "It's not new to us. We have participated in these
processes before," he said, adding that the company is committed to
working with regulators.
Google in 2012 evaded serious penalties in an FTC antitrust
probe and subsequently paid billions in fines in Europe for
anticompetitive behavior.
Chief Financial Officer Ruth Porat said the effect of scrutiny
on YouTube was negligible and that the increasing removal of
content that violates the company's policies had virtually no
impact on the unit's revenues.
In a sign of its confidence in the future, Alphabet said
Thursday that it authorized a stock buyback of $25 billion, its
largest ever. The company ended the quarter with more than $121
billion in cash on hand. Investors have for years pushed technology
companies to return more money, to little avail.
Write to Rob Copeland at rob.copeland@wsj.com
(END) Dow Jones Newswires
July 26, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Alphabet (NASDAQ:GOOGL)
Historical Stock Chart
From Aug 2024 to Sep 2024
Alphabet (NASDAQ:GOOGL)
Historical Stock Chart
From Sep 2023 to Sep 2024