Alphabet’s Profit Jumped 73 Percent in the First Quarter

Alphabet reported revenues of $31.1 billion in the last quarter, 26 percent higher than a year earlier, thanks to growth in advertising on the Google search engine and YouTube, but the costs of this tech giant also rose significantly.

According to a business report released on Thursday, the net profit of the parent company of Google reached $9.4 billion in the first quarter of this year, almost 73 percent higher than a year earlier.

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Such a strong profit jump is attributed to savings of about $3 billion due to tax changes in the U.S. at the beginning of the year, as well as earnings of about $1.1 billion based on exchange rate differences.

“The profit jump is purely due to a one-time effect. The report shows that Alphabet is increasing investments to keep pace with Amazon.com and must share more of its revenues with those who drive traffic on the internet,” says James Cordwell, an analyst at Atlantic Equities.

Thus, Alphabet’s costs in long-term capital in the last quarter reached $7.3 billion, while a year earlier they amounted to $2.5 billion.

However, strong advertising growth, up 24 percent year-on-year, boosted revenues, so analysts say that, for now, there is no indication in the business results that internet users are concerned about their privacy being compromised, following the recent revelation that Facebook user data was used without their consent.

Strong Jump in Advertising Revenue

“Strong economic growth has prompted companies to spend more on advertising, moving away from traditional media advertising towards online and social media advertising. Google dominates both mobile and desktop search. The impact of the Facebook case seems to be very small,” says Ivan Feisneth, an analyst at Tigress Financial Partners.

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In the last quarter, the number of ads, or paid ‘clicks’, jumped by 59 percent compared to the same period a year earlier, more than the 48 percent jump in the previous quarter. Costs per ‘click’ decreased by 19 percent year-on-year, indicating that advertising prices are also decreasing.

The results show, analysts say, that Alphabet is coping well with fierce competition from Facebook in the mobile and video advertising market, which is growing rapidly as advertisers are willing to pay well for a few seconds of targeted viewers’ attention.

A large portion of Google’s revenue is attributed to the popularity of YouTube.

In addition to Google itself, which encompasses the search engine and YouTube, other business segments of Alphabet in which the company invests heavily, such as hardware and cloud services, are also experiencing growth.

The company’s non-advertising revenues reached $4.4 billion in the last quarter, which is 34 percent higher than a year earlier.