Alphabet, even with record EU fine, remains a money machine – CNET


Google was hit with a big fine from the European Commission last month. 

Claudia Cruz/CNET

Alphabet, the parent of Google and one of the most powerful companies in the world, is fighting a big antitrust battle in Europe and other fronts. Even so, it’s still a cash cow.

Last month, the European Commission for the first time called Google’s search engine a monopoly and fined the company $2.74 billion for favoring its shopping ads over those of competitors. Google is expected to appeal the ruling, but in the meantime, it’s taking the hit in its finances and set aside those funds for the fine. Google’s chief accountant Amie Thuener explained the math on June 30.  

Still, in the quarter ended June 31, Alphabet beat analyst estimates for sales and profit. Earnings per share were $5.01. Analysts originally expected profit would be $8.25 per share, but cut that number almost in half to $4.49 to factor in the fine, according to Reuters estimates. 

Alphabet also racked up $26.01 billion in sales. That’s up 21 percent from a year ago and better than analyst forecasts of $25.6 billion.

Earlier in the day, Alphabet also announced Sundar Pichai — who leads Google, Alphabet’s largest and only moneymaking unit — became a member of Alphabet’s board. He joins Google cofounders Larry Page and Sergey Brin, as well as veteran venture capitalist John Doerr and former Ford CEO Alan Mulally.

“We’re delivering strong growth with great underlying momentum, while continuing to make focused investments in new revenue streams,” Ruth Porat, Alphabet’s finance chief, said in a statement.

The company’s latest financial snapshot comes as Alphabet is reckoning with its outsize influence on the world. Aside from the European Commission fine, the US Department of Labor has been investigating Page and his team for possible gender pay inequality.

And earlier this year, the company was dealing with the fallout of a major controversy involving ads on YouTube being placed alongside videos from hate groups and extremists. Several big-name advertisers, including Pepsi, AT&T and Johnson & Johnson, boycotted the company.

Meanwhile, Alphabet’s Waymo unit has been in a very public — and sure-to-be expensive — tussle with Uber over self-driving cars. The crux of the case is a trove of 14,000 documents allegedly stolen by former Google engineer Anthony Levandowski. He joined Uber last year, and the ride-hailing company fired him in May.

The fine from European regulators is a drop in the bucket for Alphabet — which had profit of $19.5 billion last year — but the antitrust case could mean Google has to change the way it runs search, its biggest business. But those possible changes remain to be seen. That’s important because Google’s digital ads, which compete primarily with Facebook’s ads, account for around 90 percent of Alphabet’s revenue. 

Outside of ads, though, Alphabet is well-known for its moonshots — like self-driving cars or balloons meant to beam wi-fi down to remote regions of the world. On Monday, Google said those projects, which it calls “Other Bets,” are losing less money than they used to. They lost $772 million in the second quarter, versus $855 million over the same period last year. 

Road Trip 2016: Reporters’ dispatches from the field on tech’s role in the global refugee crisis. 

Road Trip 2015: CNET hunts for innovation outside the Silicon Valley bubble. 

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