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Google is still growing 21 percent — and its cloud segment is growing even faster

Despite a $2.7 billion fine, Google’s parent company beat expectations for revenue and profits.

Google CEO Sundar Pichai Opens I/O Developer Conference
Google CEO Sundar Pichai
Justin Sullivan / Getty

Google’s parent company Alphabet just reported its second-quarter results, posting both higher revenue and profits than estimated.

Of note:

  • Overall, Alphabet revenue grew 21 percent year over year to $26 billion. Google revenue, specifically, also grew 21 percent to $25.8 billion.
  • Google’s “other” business — everything that’s not advertising, including its cloud business and Google Play app store — grew 42 percent year over year to $3.1 billion.
  • “Other” now represents 12 percent of Google’s business, up from about 10 percent the same quarter a year ago.
  • The Alphabet “Other Bets” — experimental businesses like Waymo’s self-driving car technology and Verily’s health care products — posted both higher revenue and smaller losses. Revenue grew 34 percent year over year to $248 million, while its operating loss declined 10 percent to $772 million.
  • The “Other Bets” now represent about 1 percent of Alphabet’s total revenue.

Overall, Alphabet earned $5.01 per share on $26 billion in sales during the quarter, versus expectations of $4.83 earnings per share and $25.6 billion in revenue.

Profit estimates were lower than normal on account of a one-time fine from European regulators over anti-competitive behavior for its product listing ads. They charged the search giant with favoring certain results that were part of its special product advertising program. The company recorded the fine — $2.7 billion — in the quarter as an additional operating loss.

Alphabet is likely to appeal the ruling, but if it has to change how it sells and displays those kinds of ads in Europe, it could dent its longer-term revenue. Sales from the EMEA region account for about 34 percent of the company’s overall revenue, and these so-called product listings ads in the region could drop by as much as 25 percent according to a Goldman Sachs estimate.

Alphabet stock was down about 3 percent in after-hours trading ahead of its earnings call.

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