Google’s Parent Alphabet Spends and Thrives | Koeppel Direct

Google’s Parent Alphabet Spends and Thrives

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Even as Facebook is being raked over the coals over user data security, fellow Internet advertising giant Alphabet is making, and spending, a bundle.

Net profits at Alphabet grew 73 percent year over year in the first quarter, to $9.4 billion from $5.4 billion. It’s the strongest earnings growth since the fourth quarter 2009. But, with this success has come a significant increase in spending.

What is Alphabet Buying Now?

Alphabet’s capital expenditures have nearly tripled over the last year, causing more than a few raised eyebrows.

Just what is that company buying? For one, it’s buying Apple smartphone users, a cost that’s rising as Google’s parent company continues to encourage the practice of directing iPhone users to Google for search.

Other purchases include a $2.4 billion building in New York City’s Chelsea Market and heavy investments in undersea cabling and data centers. Alphabet’s CFO Ruth Porat told The Wall Street Journal that the dramatic uptick in spending “reflects the demand we are seeing,” further indicating that these are largely not expected to be one-time expenses.

Show Me the Money, Alphabet

Alphabet has always been a bit secretive about how much income it’s bringing in from where, but there are some known quantities. Google remains a leader in the global advertising business, despite growing challengers. It is expected to keep hold of 31 percent of the global online ad market revenue this year, down slightly from 31.7 percent last year.

Although ad revenues are still Alphabet’s biggest income sources right now, it is investing more heavily in its “Other Bets” segment, which includes experimental tech, as well as shares in startups like Uber. Nest Labs recently moved from “Other Bets” into its own category, after 2017 revenues topped $726 million. That’s about 60 percent of the income from the “Other Bets” category last year.

YouTube revenues aren’t shared by Alphabet, but experts estimate that it will generate between $11 billion and $20 billion this year, projected to be 10 to 18 percent of Alphabet’s overall revenue. Other income boosts came from Alphabet’s stake in Uber and other securities. About $3 billion in net profit was attributed to these investments.

 

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