Alphabet Soars with a 29% Rise in Profit Boosted by Google Ads, while ‘Other Bets’ Falter

In a victorious turn of events this week, Alphabet, Google’s parent company, released its earnings report exceeding market expectations. Stepping in line with predictions, Alphabet’s profit leaped by an impressive 29 percent year on year, largely driven by robust ad sales.

Google’s stellar revenue, mainly supported by ads on its platforms like YouTube, Search, and display, totaled $24.75 billion. This marks a significant 22 percent uptick from the same period last year. Consequently, Google’s net profit journeyed upward to $5.42 billion, a 29 percent surge from the first quarter of 2016. On the heels of this triumphant earnings report, Alphabet’s shares witnessed a refreshingly buoyant rise of roughly 3 percent.

Alphabet’s Chief Financial Officer (CFO) Ruth Porat, appeared visibly pleased while discussing the report. He commented, “Our excellent results represent a terrific start to 2017, with revenues up 22% versus the first quarter of 2016 and 24% on a constant currency basis. We clearly continue to benefit from our ongoing investments in product innovation and have great momentum in our new businesses across Alphabet.”

However, when turning our focus to what Alphabet refers to as “other bets” — businesses outside Google’s purview like Waymo and internet beaming balloons, for instance, the narrative is different. As the CFO delineates, “We clearly continue to benefit from our ongoing investments in product innovation and have great momentum in our new businesses across Alphabet.” Despite this affirmation, the revenue for this collection of businesses was recorded at a modest $244 million, sporting a less noteworthy growth of 48 percent from the first quarter of 2016.

The data reveal, Alphabet reported a loss stinging at $855 million on businesses still in their infancy and invested heavily in research. This underscores Alphabet’s strategy of continuously pouring investment into these firms until they find their footing and become self-reliant or face cancellation.

The lustrous earnings report arrives amidst the release of the Interactive Advertising Bureau’s annual report which painted Google and Facebook with a sizeable 49 percent and 40 percent share of the digital ads market in the United States for 2016. Nevertheless, market speculations suggest Facebook is well on its way to chipping away at Google’s global dominance in 2017. Unfortunately, the report does not shimmer brightly for the likes of Twitter and Yahoo.