ALPHABET RECORDS HIGHER SALES

Q3 revenue surges 24 per cent to US$27.8 billion, above average analysts’ estimate of US$27.2 billion

ALPHABET Inc on Thursday reported strongerthan-expected advertising sales and higher operating margins, boosting its shares as investors brushed off concerns about higher costs for acquiring mobile users.

The stock was up nearly three per cent at US$1,001.50 (RM4,248.36) after the bell. They have gained 25 per cent this year.

Third-quarter revenue for Alphabet, the parent company of Google, jumped 24 per cent to US$27.8 billion, above the average analysts’ estimate of US$27.2 billion. Profit of US$6.7 billion was well ahead of Wall Street estimates.

Alphabet, along with much of the tech sector, has enjoyed torrid growth in recent years as advertising moves from traditional media to the Internet and consumers flock to an ever-expanding array of digital devices.

While Google faces political pressure, especially in Europe, over its growing dominance and its role in spreading propaganda online, those problems have yet to hit the bottom line.

Google chief executive Sundar Pichai told analysts that efforts to attract “both large and small advertisers” around the world were paying off, especially in Asia, where sales rose 29 per cent to US$4.2 billion.

The third quarter was the 15th in a row in which Alphabet has shown double-digit, year-overyear consolidated sales increases. The pace is not slowing down, with the growth rate reaching its highest level in nearly five years.

Ad sales at Google, Alphabet’s main operating unit, account for the vast majority of the company’s revenue.

The ad business faces competition from Facebook Inc but has continued to grow as more users turn to Google’s YouTube and mobile search services.

Alphabet shares trade for almost 25.8 times expected earnings and Facebook at about 26.5 times, according to Thomson Reuters data.

Investors have been increasingly concerned about a sharp rise in costs for getting ads in front of users as Google pays Apple Inc and other companies to integrate Google search into mobile products and services.

The payments are included in traffic acquisition costs, or TAC, and they rose 54 per cent in the quarter, accounting for 12 per cent of ad sales.

Pichai defended the partnerships in response to several analysts’ questions on Thursday, calling the deals “a win-win construct” because Google performs “better when our partners do well”. Reuters