Increasing revenues form internet advertising propelled the profits by 37 per cent for the first quarter of the year for Google-owner Alphabet.
There were fears that the revenues and profits of the search engine could be impacted by increasing costs and regulations. But the company performance allied those fears.
Wall street expectations were beaten as the net income for the first quarter increased from $5.4 billion in the same period last year to $9.4 billion. there was a 26% increase in revenues to $31.1 billion from $24.8 billion.
Currency exchange movements resulted in a gain of $1.1 billion while a change to accounting rules, added another $3 billion to the income of the search engine giant in the first quarter.
The company however identified its strategy of higher rates for ads on its online platforms including the Google search engine, YouTube video service and partner apps and websites to be behind the surge in income and profits.
“The strong economy has companies spending more on advertising and we have an ongoing migration from traditional types of media advertising to greater online and social media-based advertising,” said Ivan Feinseth, an analyst at Tigress Financial Partners.
Alphabet has retaining a significant portion of its profits for reinvesting in some of the growing business areas such as cloud computing and hardware which has resulted in a drop in the profit margins of the company in recent quarters.
And this was reflected in the company data which noted a nearly three-fold increase in capital; spending in the first quarter to nearly $7.7 billion. the increasing pressure on the company to alter its how it does business has also seen its share prices fluctuate so far in 2018.
The new General Data Protection Regulation (GDPR) that is to be brought in by the European Union from May 25 this year is a major cause of concern for investors. The law will allow greater control of the users over their personal data and cause a significant increase in potential fines for data breach incidents.
There are some experts who believe that Google’s sales could be hit as the new regulation will allow the users to prevent receiving personalised ads online.
The concerns were however played won by Google boss Sundar Pichai in a conference call with reporters.
“GDPR is a fairly new public topic, but for us it is not new – we started working on it 18 months ago.
“We are working very closely with our publishers and our partners… It is a big effort, we are very committed to it and to getting it right.”
There was a jump of 1 per cent in the shares of Alphabet following the financial performance announcement.
(Adapted from BBC.com)