Rich Gets Richer: Google Parent Alphabet Reports Higher-Than-Expected Ad Sales

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The Google logo hangs over the company's exhibition stand at the Dmexco digital marketing conference in Cologne, Germany, in September.
The Google logo hangs over the company's exhibition stand at the Dmexco digital marketing conference in Cologne, Germany, in September. Credit: Krisztian Bocsi/Bloomberg

Google parent Alphabet reported quarterly revenue and profit on Thursday that topped analysts' estimates after buoyant internet ad sales made up for heavy spending on a slew of unprofitable newer products and projects, including self-driving cars and smartphones.

Revenue, excluding payments to partner sites, rose 16% to $18.3 billion, the company said in a statement. Profit before certain items climbed 23.3% to $9.06 a share. Analysts on average had projected sales of $18 billion and per-share profit of $8.61, according to data complied by Bloomberg. Shares climbed in extended trading.

Gains in Google's core ads business continued to offset spending on what the company calls Other Bets -- riskier long-term projects like the Fiber internet service and autonomous vehicles. Several of these new efforts have lost senior executives in the past few months.

To bolster the company's main money-maker, Google has rolled out new ad features for mobile devices. Analysts expected these new tools to drive growth along with a continued increase in ad spending on Google's YouTube video service. The total number of ads clicked on Google's websites jumped 42% in the latest quarter, thanks to more paid ads on YouTube, an Alphabet executive said.

"Online video is the biggest online ad growth driver and YouTube is the premier vehicle to play that trend," Brian Fitzgerald, an analyst at Jefferies LLC, wrote in a note to investors before the earnings report.

"Mobile search and video are powering our core advertising business and we're excited about the progress of newer businesses in Google and Other Bets," Chief Financial Officer Ruth Porat said in the statement.

Observers were also watching for signs of growth in Google's enterprise business, a rising emphasis for the company as it attempts to chase larger rivals Inc. and Microsoft Corp. in the market for business software and cloud services. Google's "Other" revenue line, which includes the enterprise business, grew 39% to $2.4 billion in the third quarter.

Losses continued to mount at Alphabet's disparate Other Bets divisions, which include more ambitious, risky efforts. Ms. Porat has said investment in these initiatives is necessary for the company's foray into nascent industries.

Other Bets generated revenue of $197 million in the latest period. But operating losses were $865 million, suggesting heavy investment by the company.

-- Bloomberg News

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