Alphabet's quarterly profits fall after $5 billion European Union fine

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Google's parent company Alphabet announced last night that it has posted a net profit of $3.2 billion on revenues of $32.7 billion in the quarter ending June 30.

Analysts polled by FactSet expected Alphabet to report per-share earnings of $9.66, excluding the impact of a $5.07 billion charge in connection with a European Commission fine alleging abuse of its dominant Android operating system.

TAC, an important metric in Google's ad business, crept up to 23% of ad revenue in Q2, up slightly from the 22% reported during the same period a year ago.

Shares of Google were up significantly after hours, rising 5 percent immediately after the numbers were released. Google has said it will appeal.

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Alphabet shares also have been lifted, according to analysts, by a forecast that expense growth would level off in the second quarter because the company entered the second year of a costly deal to make Google the default search provider on iPhones.

That figure is way down from last quarter when Google spent $7.67 billion, a number that was juiced by the $2.4 billion purchase of the Chelsea Market building in NY. The company's stock took a slight hit after news of the fine broke last week, but it was trading at $1,211 per share at market close, up 7 percent over the past month.

The Mountain View, Calif., company's $32.66 billion in second-quarter revenue, 86 percent of which came from Google's advertising business, beat Wall Street's estimate of $32.17 billion.

"Our investments are driving great experiences for users, strong results for advertisers, and new business opportunities for Google and Alphabet", said Ruth Porat, chief financial officer for both Alphabet and Google in a statement.

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What makes these results most impressive, perhaps, is that they include that $5 billion European Union fine: Alphabet has already recognized the charge and is moving on.

While second-quarter sales jumped, so did costs for the technology giant. The others: Apple (valued at $940 billion) and Amazon ($880 billion).

Areas such as cloud computing and "other bets" have also added to Google's spending.

Other Bets, the home of Google's riskier, experimental businesses, lost US$732 million in the quarter, versus a loss of US$633 million in the same period a year earlier. The largest Ad Revenue-based 'Net business has now averaged 23% growth for 34 (count 'em) straight quarters & shows no signs of slowing.

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