Google fine hits Alphabet's profit

Shares fall after internet giant posts 28 per cent drop in net earnings

Google
(Image credit: Leon Neal/AFP/Getty Images)

Google's record fine for allegedly abusing its dominant search position has contributed to a sharp fall in net earnings at its parent company Alphabet.

Ruth Porat, Alphabet's chief financial officer, told investors on Monday the company was "reviewing our options" and may appeal the ruling, says the Financial Times.

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Her comments came in response to analyst questions over a reported drop in profit of 28 per cent from $4.9bn (£3.8bn) to $3.5bn (£2.7bn).

However, it wasn't just Google's fine that did the damage: the cost of generating increased advertising revenues also rose markedly, with "traffic acquisition costs" up 28 per cent and "cost-per-click" paid by advertisers down 23 per cent.

Revenue rose 21 per cent to $26bn (£20bn), with income at the main Google business, which also includes YouTube, up by the same margin to $25.8bn (£19.8bn).

Overall earnings per share came in at $5.01, beating analyst expectations of $4.46.

Writing on MarketView, Therese Poletti says Alphabet's reporting does not give detail on high-growth business areas such as YouTube, which could lead investors to focus on negatives.

"Investors may have found a reason to bid Google's stock price higher with hard data showing YouTube's growth Monday, but instead they seemed to focus on the falling cost-per-clicks... and increasing traffic-acquisition costs," she writes

Investors might also have focused on another EU investigations into competition concerns over its Android operating system and new European privacy laws that could hurt its advertising businesses.

Alphabet's share price fell 2.5 per cent in after-hours trading to $998.3.

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