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Alphabet (Google) just reported revenue growth of 25%

The technology giant Alphabet (Google) just reported its result for the three months ended 30 June 2018.

I’m sure every reader is aware of Alphabet’s wide-reaching services including Search, Play, Youtube, Maps and Android.

The company recently received another fine from the European Commission on top of the one it received in the second quarter of 2017, so it reported its results both with and without the fines. All numbers for the June quarter result are in US dollars compared to the June 2017 quarter, here is a summary:

  • Revenue increased by 25.5% to $32.66 billion

With fines

  • Operating income declined by 32%
  • Operating margin dropped from 16% to 9%
  • Earnings per share (EPS) declined by 9.4% to $4.54

Without fines

  • Operating income increased by 14.7%
  • Operating margin decreased from 26% to 24%
  • EPS increased by 32% to $11.75

According to Bloomberg, analysts were expecting that second quarter sales, less partner payouts, would be $25.55 billion but Alphabet generated an impressive $26.24 billion.

Chief Financial Officer (CFO) Ruth Porat said that most of the 24% growth of Google’s advertising business came from mobile and automated ads.

CFO Porat commented “We delivered another quarter of very strong performance, with revenues of $32.7 billion, up 26% versus the second quarter of 2017 and 23% on a constant currency basis. Our investments are driving great experiences for users, strong results for advertisers, and new business opportunities for Google and Alphabet.

Despite Alphabet’s gigantic size it is still rapidly investing for more growth, which can be seen with the number of employees increasing from 75,606 a year ago to 89,058 at the end of June 2018

Interestingly, more of Google’s advertising money was generated by its own websites like Youtube and Search, compared to third party sites that run ads. I think that speaks to the powerful assets that Alphabet owns.

Foolish takeaway

Other than Facebook I can’t think of another large blue chip business that is generating such strong growth and trading at an attractive value. Alphabet’s shares were up 3.6% in extended trade. I think it would be a good long-term buy at the current price.

If you want to get a slice of Alphabet on the ASX then one of these top shares is probably the best way to do it.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool Australia has recommended Alphabet (A shares). We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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