Alphabet's quarterly profits fall after $5 billion EU fine

It's hard to keep making more money when you keep getting hit with huge fines.
Nathan Ingraham
N. Ingraham|07.23.18

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Arnd Wiegmann / Reuters
Arnd Wiegmann / Reuters

Google's parent company Alphabet is presenting its quarterly earnings today, just a week after Google was hit with a $5.04 billion fine from the EU Commission regarding antitrust violations around Android. But whether or not you take the fine into account, Alphabet posted strong numbers again this quarter.

The company's total revenue of $32.7 billion represents a 26 percent increase over Q2 2017. Coincidentally, Google also had to pay a fine to the EU last year, so both of those quarters show much lower profits than they otherwise would. In fact, due to this year's fine, Alphabet's profits of $3.2 billion represents a drop of about 10 percent compared to the $3.5 billion the organization made last year.

Naturally, Alphabet is presenting this info with some context, giving revenue and profit numbers for Q2 of 2017 and 2018 excluding those hefty fines. In that case, the company managed to steadily grow its profit before having to pay back the EU. Alphabet would have hit almost $7.9 billion in profits this past quarter, up from the $6.9 billion it earned in Q2 2017 and the $4.9 it made in Q2 2016. That said, it's worth considering that if Google continues to run into trouble with the government, such fines could continue to impact the company's business. Last year, I wrote that the company doesn't expect to be paying such fines on a regular basis, but that's proven to be wrong this year.

In other parts of the Alphabet business, the ever-mysterious "other bets" segments pulled in $145 million, up 49 percent from a year ago -- but losses have increased to $732 million (up 16 percent). That's probably not a major concern to Alphabet, as the company doesn't expect those other bets organizations to be turning a profit immediately. Oddly enough, however, Alphabet isn't spending much money to get those groups going -- capital expenditures for Other Bets was a puny $10 million for the quarter, compared to $148 million a year ago.

Finally, Google's "other revenues" segment -- which includes the Play Store, hardware sales and a variety of other consumer-focused products -- grew again, up 37 percent year-over-year to $4.4 billion in revenue.

As usual, Alphabet will be holding a conference call with CFO Ruth Porat and Google CEO Sundar Pichai at 4:30 PM ET, and we'll be updating this post with any additional information the company shares.

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