October 26 (Reuters) – Google owner Alphabet Inc (GOOGL.O) beat third-quarter revenue expectations on Tuesday, a positive sign that its advertising business is overcoming new limits in tracking mobile users.
Thanks to its search engine, YouTube video service, and web partnerships, Google sells more internet advertising than any other business. Demand for its services has increased over the past year as the pandemic has forced people to spend more time online and their new habits have persisted.
Google’s advertising revenue rose 41% to $ 53.1 billion in the third quarter. Alphabet’s overall sales jumped to $ 65.1 billion, above the average estimate of $ 63.336 billion among analysts tracked by Refinitiv.
Shares fell 0.69% to $ 2,767 after the after-hours financial results were released.
Quarterly profit was $ 18.936 billion or $ 27.99 per share, beating expectations of $ 24.08 per share and marking a third consecutive quarter of record earnings. Alphabet’s profits are subject to large fluctuations as accounting rules require the company to measure unrealized gains from its investments in startups as income.
Consumer concern about how Google and other companies use their surfing behavior to profile them and then choose which ads to serve has grown. In the latest challenge, Apple Inc (AAPL.O), whose iPhones make up half of the smartphones in the United States, has given its users more control to stop tracking in recent months. The change led advertisers to recalibrate their spending in a way that Google’s competitors, Snap Inc (SNAP.N) and Facebook Inc (FB.O), hurt their sales in the third quarter. Read more
Google may have been less affected as its search engine collects data on user interests that is valuable to advertisers and unmatched in the industry.
Google Cloud, which tracks Amazon.com Inc (AMZN.O) and Microsoft Corp (MSFT.O) in terms of market share, increased revenue 45% to $ 4.99 billion, slightly below estimates of $ 5.2 billion.
Alphabet’s total costs rose 26% to $ 44.1 billion in the third quarter, and the company’s headcount surpassed 150,000 employees.
Alphabet shares have outperformed many large peers since the end of last year, rising around 57%. Microsoft is up 39%, Facebook 20% and Amazon 2% over the same period. But Alphabet shares are trading at a slight discount to Facebook, the Internet’s second-largest online ad seller. Facebook is trading at 6.8 times expected revenue over the next 12 months, compared to 6.4 times for Alphabet.
In recent weeks, Facebook has been inundated with accusations from a former employee who leaked thousands of confidential company files to the media and filed complaints with the US securities regulator over alleged misrepresentation from the company about its risks of hosting inappropriate content. Read more
Google has been caught in some of the fallout. A YouTube policy official testified before the U.S. Congress earlier Tuesday alongside other companies about the harms of social media for young users. Read more
Investors are also awaiting further changes in Google’s business following the firm’s scrutiny of market power. US authorities and others have alleged that some of the company’s advertising and research practices are anti-competitive, although the company claims they benefit users. In a concession to critics last week, Google said it would reduce some of the fees it collects for apps on its Play app store starting next year.
But the move could end up generating new revenue for Google if it prompts companies like music streamer Spotify Technology SA (SPOT.N) to start selling subscriptions through their apps and give Google 10 to 15 percent of the money. sum.
Reporting by Nivedita Balu in Bengaluru and Paresh Dave in Oakland, California Editing by Arun Koyyur and Matthew Lewis
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