Alphabet Inc (Nasdaq GOOG) reports earnings down $30 after hours

Alphabet the parent company of Google, released their Q2 earnings a couple minutes ago. The stock is down over $30 (3%) in after hours trading. Revenues were up 21% year over year. Operating margin looks to have taken a hit, 28% Q2 last year and 16% Q2 this year.

More info at Abc.xyz

 

MOUNTAIN VIEW, Calif. – July 24, 2017 – Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended June 30, 2017.

“With revenues of $26 billion, up 21% versus the second quarter of 2016 and 23% on a constant currency basis, we’re delivering strong growth with great underlying momentum, while continuing to make focused investments in new revenue streams,” said Ruth Porat, CFO of Alphabet.

Q2 2017 financial highlights

In order to facilitate comparison of current quarter performance to prior periods, this summary table highlights the impact of the $2.7 billion European Commission (EC) fine, which was accrued in Q2 2017:

Q2 2017 summary results reflecting EC fine
	Including (GAAP)		Excluding
Revenues	$26,010		$26,010
Operating income	$4,132		$6,868
Net income	$3,524		$6,260
Diluted EPS	$5.01		$8.90

 

The following summarizes our consolidated financial results for the quarters ended June 30, 2016 and 2017 (in millions, except for per share information, effective tax rate, and headcount; unaudited), reported on a GAAP basis including the impact of the EC fine:

	Three Months Ended June 30, 2016		Three Months Ended June 30, 2017
Revenues	$21,500		$26,010
Increase in revenues year over year	21	%	21	%
Increase in constant currency revenues year over year	25	%	23	%
Operating income	$5,968		$4,132
Operating margin	28	%	16	%
Net income	$4,877		$3,524
Diluted EPS	$7.00		$5.01
Diluted shares (in thousands)	696,847		703,503
Effective tax rate (ETR)	20	%	19	%
Headcount	66,575		75,606

Q2 2017 supplemental information

Segment revenues and operating results (in millions; unaudited):

	Three Months Ended June 30, 2016		Three Months Ended June 30, 2017
Google properties revenues	$15,400		$18,425
Google Network Members’ properties revenues	3,743		4,247
Google advertising revenues	19,143		22,672
Google other revenues	2,172		3,090
Google segment revenues	$21,315		$25,762
Other Bets revenues	$185		$248
Google operating income*	$6,990		$7,803
Other Bets operating loss	$(855)		$(772)
*The EC fine is included in reconciling items as it is not allocated to Google for segment reporting purposes.

Traffic acquisition costs (TAC) to Google Network Members and distribution partners (in millions; unaudited):

	Three Months Ended June 30, 2016		Three Months Ended June 30, 2017
TAC to Google Network Members	$2,623		$3,042
TAC to Google Network Members as % of Google Network Members’ properties revenues	70	%	72	%
TAC to distribution partners	$1,352		$2,049
TAC to distribution partners as % of Google properties revenues	9	%	11	%
Total TAC	$3,975		$5,091
Total TAC as % of Google advertising revenues	21	%	22	%

Paid clicks and cost-per-click information (unaudited):

	Change from Q2 2016 to Q2 2017 (YoY)	Change from Q1 2017 to Q2 2017 (QoQ)
Aggregate paid clicks	52 %	12 %
Paid clicks on Google properties	61 %	15 %
Paid clicks on Google Network Members’ properties	9 %	(5) %
Aggregate cost-per-click	(23) %	(6) %
Cost-per-click on Google properties	(26) %	(8) %
Cost-per-click on Google Network Members’ properties	(11) %	5 %

The EC fine

On June 27, 2017, the EC announced its decision that certain actions taken by Google regarding its display and ranking of shopping search results and ads infringed European competition law. The EC decision imposes a €2.42 billion (approximately $2.74 billion) fine, which we accrued in the second quarter of 2017. The fine is included in “accrued expense and other current liabilities” on our Consolidated Balance Sheet.