Alphabet shares dip; Google CEO joins board
Alphabet Inc. reported second-quarter revenue that met analysts’ projections, falling short of the mostoptimistic estimates, and said the cost of its Google ads declined. The company’s profit was also hammered by a record antitrust fine from the European Union.
Sales, minus partner payouts, were $20.92 billion, in line with analysts’ consensus forecasts, but below some more bullish expectations. Estimates ranged from $20.55 billion to $21.61 billion.
Google also reported a 23 percent decline in the average price of its ads, compared with a year earlier. That was bigger than the first quarter’s 19 percent year-over-year drop.
Alphabet shares fell 2.8 percent in afterhours trading. The stock closed up 0.5 percent at $998.31 in New York trading earlier on Monday.
The total number of Google ads users clicked rose quickly, skewed heavily toward Google’s own properties, like Search and YouTube. “The biggest contributor to growth was mobile search, and it’s clearly an area where we continue to grow from our underlying engineering strength,” Chief Financial Officer Ruth Porat said on a call with reporters.
Regulators in Europe levied a $2.7 billion penalty in June, saying Google skewed its general search results to thwart smaller shopping search services. The Mountain View company disagreed and is considering an appeal. Two more antitrust probes against Google sit on the EU docket, a concern for some analysts worried about the impact of any forced changes to Google’s business.
The company accounted for the fine as a one-time dent on profit during the quarter, bringing net income to $5.01 per share. Analysts were expecting $4.45 per share, including the EU fine, according to figures compiled by Bloomberg.
Spending on Alphabet’s “Other Bets” fell sharply during the quarter. Porat attributed this to an ongoing retreat in the expansion of its Google Fiber fast Internet service.
The company also announced Monday that Sundar Pichai, chief executive officer of its Google unit, will join the Alphabet board. The appointment is another signal of his rising importance at the company.
He joins the company’s founders, Larry Page and Sergey Brin; its chairman, Eric Schmidt; and nine other veterans of technology, finance and automotive industries.
“Sundar has been doing a great job as Google’s CEO, driving strong growth, partnerships, and tremendous product innovation,” Page said in a statement. “I really enjoy working with him and I’m excited that he is joining the Alphabet board.”
The move also resolves a potentially awkward situation: As CEO, Pichai was responsible for the Google Cloud business run by Diane Greene, but Greene also had oversight of Pichai as an Alphabet board member.
The Indian-born executive took the reins of Google in August 2015, when Page announced the Alphabet restructuring and became CEO of the parent company. Pichai, who joined Google in 2004, gained attention internally leading the Chrome business. Page placed him in charge of the Android mobile operating system, a key strategic asset, in 2013. Pichai soon took over more product divisions as Page stepped further away from day-to-day management of Google.
Since Pichai, 44, became Google’s CEO, he has shuttled resources toward artificial intelligence research and cloud computing while maintaining steady growth of its main advertising business. During his tenure, Alphabet’s stock has risen about 50 percent. Alphabet gave him $199.7 million in compensation in 2016.