Alphabet’s profit soars on strong advertising sales

California-based company's net profit hit $18.5bn in the three months ending June 30

Alphabet, the parent company of Google, beat expectations in its latest earnings report. AP

Alphabet's second-quarter net profit soared more than 166 per cent year-on-year on the back of strong revenue growth in its advertising business.

Net profit at Google's parent company surged to $18.5 billion in the three months ending June 30, about $11.6bn more than the same period a year earlier.

Our long-term investments in AI and Google Cloud are helping us drive significant improvements in everyone’s digital experience

Sundar Pichai,
chief executive of Google and Alphabet

Revenue during the quarter increased 61.5 per cent on an annual basis to $61.9bn, beating the $55.2bn average analysts' estimate.

In the second quarter, “there was a rising tide of online activity in many parts of the world and we are proud that our services helped so many consumers and businesses” Sundar Pichai, chief executive of Google and Alphabet, said.

“Our long-term investments in AI [artificial intelligence] and Google Cloud are helping us drive significant improvements in everyone’s digital experience,” added Mr Pichai.

Alphabet's chief executive Sundar Pichai said YouTube is the one the fastest growing consumer services. AFP

The California-based company’s advertising revenue from Search, YouTube and other activities soared 68.8 per cent to $50.4bn in the second quarter, almost $20.5bn more than the same period last year.

This was the fastest annualised growth rate in advertising revenue in more than four years.

The company's stock was down about 1.6 per cent at $2,638 a share after the earnings announcement.

Retail was one of the biggest contributors to the company’s advertising growth, Google’s chief business officer, Philipp Schindler, said on an earnings call.

The total revenue from the cloud business grew an annual 53.9 per cent to more than $4.6bn, while revenue from other bets, or subsidiaries, increased almost 29.7 per cent yearly to $192 million.

Other bets are derived mainly through the sale of internet offerings as well as licensing and research and development services. This includes Alphabet’s X lab, self-driving unit Waymo and other non-Google companies.

The company’s expenditure on R&D rose 11.6 per cent on an annual basis to $7.7bn in the second quarter.

“Our strong second-quarter revenues reflect elevated consumer online activity and broad-based strength in advertiser spending. Again, we benefited from excellent execution across the board by our teams,” said Ruth Porat, chief financial officer of Google and Alphabet.

YouTube added more than $7 billion to Alphabet’s revenue in the second quarter. Randi Sokoloff / The National

YouTube added more than $7bn to Alphabet’s revenues, rising about 83.7 per cent annually and was close to streaming service company Netflix’s second-quarter revenue of $7.3bn.

Mr Pichai said YouTube is “the fastest growing consumer service” that the company has.

“In the US, we have over 120 million people who watch YouTube on TVs every month and that’s up from, like, a hundred million last year,” he said.

This month, YouTube rolled out the beta, or test, version of Shorts — its short-form video experience to rival popular Chinese app TikTok — in more than 100 countries, including the Middle East and North Africa region.

Shorts has surpassed 15 billion daily views, up from 6.5 billion daily views in March, Mr Pichai said.

The company expects a “more muted tailwind to revenues in the third quarter,” said Ms Porat, and added that it is too early to predict the longer-term trends.