The company reported per-share earnings of $11.75, excluding the impact of a $5.07 billion charge in connection with a European Commission fine. That compares with analysts’ earnings estimates of $9.66 per share.
Taking into account the fine imposed by European regulators, second-quarter earnings dropped 9.3%.
Revenue for the second quarter reached nearly $32.7 billion, up 26% from a year ago. Wall Street forecast revenue of $25.6 billion.
This is Alphabet’s first earnings report since the European Commission slapped it with a record fine for abusing the dominance of its Android mobile operating system.
European regulators said Google’s parent company unfairly favored its own services by forcing phone makers to pre-install the Chrome browser and Google search app in a bundle with the app store, Play. It also violated competition rules by preventing phone makers from selling phones that run modified versions of the Android software.
Google has 90 days to end its conduct or face additional penalties. The company has indicated it’s willing to absorb those fines as it appeals the ruling.
In a blog post, Google CEO Sundar Pichai argued that Android has enabled consumer choice, not stifled it. And that the decision would upset the “careful balance” of Android, which the company allows phone makers to use for free but generates advertising revenue whenever consumers use its apps.
Also during the quarter, the European Union’s new privacy rules took effect. Considered the most sweeping changes in data privacy in two decades, it requires digital advertising companies and publishers to obtain a consumer’s explicit consent to use their personal data.
The regulations, aimed at the digital powerhouses Alphabet and Facebook, appears not to have made a dent.
“While many had feared that GDPR would be an Armageddon to upend the digital advertising industry, we instead wondered whether it would be more akin to the Y2K bug, which after all the hype, turned out to be much ado about nothing,” wrote media analyst Michael Nathanson in a report published this morning. “After checking in on various players across the digital advertising ecosystem, from agencies managing spend to publishers monetizing content, we heard that business for the major platforms is as strong as ever.”
Investors reacted positively to the earnings report, driving Alphabet’s stock price up more than 4% in after-hours trading to $1,258.39.