Alphabet’s Q3 net vaults over 45% to $3.98 bn

23 Oct 2015


Alphabet, the holding company of the restructured Google, on Thursday reported a 45.26 per cent increase in its consolidated net profit at $3.98 billion for the July-September 2015 quarter compared to a net profit of $2.74 billion for the year-ago quarter.

Sundar PichaiConsolidated revenue for the quarter stood at $18.68 billion, up 13 per cent from the $16.52 billion revenue that Google reported in the same period last year. Google said earnings were boosted by substantial growth in mobile search revenue and strong contribution from its programmatic advertising programmes and YouTube.

Both revenue and earnings per share of $7.35 were higher than Wall Street expectations of $18.53 billion and $7.21, respectively, sending Google's stock soaring by more than 10 per cent in after-market trading.

Google also announced plans to repurchase about $5 billion worth of its Class C stock starting in the fourth quarter of this year.

This was the first time that Google's holding company, Alphabet, reports financial results since its formation earlier this year. Creating the holding company was a way to separate Google's core businesses - areas like search, advertising and YouTube - from longer term bets in areas like self-driving cars.

Under the restructuring, Google's core businesses such as Search, Maps, Android, YouTube and Google Maps have been carved out into a separate entity headed by newly appointed CEO Sundar Pichai.

All of the company's other efforts, including Google's autonomous car venture, its Calico biotech effort, Google Fiber and its moonshot projects, have been carved up into separate businesses collectively referred to as Other Bets. Google and the Other Bets ventures are now all subsidiaries of Alphabet, the newly created parent company headed by Google co-founders Larry Page and Sergey Brin.

Next quarter, Alphabet will announce financial results, including revenue, net profit and capital expenditures, for each division, said CFO Ruth Porat.

New Google CEO Sundar Pichai, who took part in his first earnings call, and in between discussed the numbers, revealed how important Google thinks machine learning is to its future.

"Machine learning is a core, transformative way by which we're rethinking everything we're doing," he said.

He was referring to a branch of artificial intelligence that's getting more attention lately. It involves using computer algorithms that can "learn" over time. A common example is its use in email, where machine learning figures out from watching users' behavior which emails are spam and which should be let through.

At Google, it's long been used for voice search and language translation, and Pichai said the technology has progressed quickly, particularly in the past two years.

"Our investments in machine learning and artificial intelligence are a priority for us," he said. Microsoft, IBM and Facebook are investing in similar areas, and machine learning is showing up in apps for business.

"We're thoughtfully applying it across all our products, be it search, ads, YouTube, or Play," Pichai said. "We're in the early days, but you'll see us in a systematic way think about how we can apply machine learning to all these areas."

Much of the growth came from mobile search, Porat said. Last quarter, the number of searches on mobile devices passed the number on desktops for the first time. India was a particularly strong area for mobile growth.

Revenue from YouTube also grew at a "significant rate," she said, and Google's programmatic advertising business - real-time, automated purchasing of ads - was strong.

And Google for Work grew at "a tremendous rate," Porat said. Google Drive for Work passed one million subscribers last quarter for the first time, she said.

Speaking of Google's cloud services for businesses, which compete with Microsoft Azure and Amazon Web Services, Pichai said Google is "investing a lot and playing for the long term"

Not all was rosy, though. Aggregate paid clicks - the number of times Google made money when a user clicked on an advertisement - increased 23 per cent from a year earlier, but the amount of money Google received for each click dropped by 11 per cent, continuing a downward trend from the past several quarters.

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