Google parent company Alphabet surprised Wall Street this week, reporting a more than 20 percent increase in quarterly profit thanks to a robust mobile advertising market.
Alphabet posted revenue of $22.45 billion and earnings per share of $9.06 for its third quarter, surpassing analysts’ predictions of $22.1 billion with earnings per share of $8.64. The company’s net income spiked 27 percent to $5.1 billion.
Alphabet chief financial officer Ruth Porat said much of Alphabet’s revenue comes from Google’s ad business. In fact, Google was responsible for $22.3 billion of the revenue Alphabet reported with $16.1 billion being Google Sites revenue.
Alphabet’s “moon shots” or “other bets” such as Google Fiber, Google X, Verily and Nest are not turning much of a profit, although revenue is up 40 percent year over year. The net loss was down to $865 million compared to $980 million in the year-ago quarter.
“We think it remains most instructive to look at financials for Other Bets over a longer time horizon because, as you have seen, quarterly revenues and expenses can be lumpy for three primary reasons. First, the Other Bets are early-stage. Second, they represent an aggregation of businesses operating in different industries. And finally, they may be impacted by one-time items like partnership deals,” Porat said during a webcast.
“For the third quarter, Other Bets revenue was $197 million, primarily generated by Nest, Fiber, and Verily. Operating loss excluding SBC was $665 million in the third quarter. Including the impact of SBC, operating loss was $865 million. Other Bets CapEx was $324 million in Q3, primarily reflecting ongoing investments in our Fiber business.”
Alphabet’s results come on the same week Google announced it plans to dial back Fiber and lay off 130 employees.