SAN FRANCISCO (Reuters) - Google owner Alphabet Inc reported first-quarter sales and profit Monday that topped financial analysts’ estimates due to strong ad sales and a change in accounting for investments in startups, sending its shares up about 1 percent after hours.
The results eased concerns that investment in new ventures beyond its core search business was undermining Alphabet’s outlook. There also were no immediate signs that rising global privacy concerns would affect 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 analyst Ivan Feinseth from Tigress Financial Partners. “Google continues to dominate both mobile and desktop search,” he added.
Worldwide sales increased to $31.1 billion, above the average analysts’ estimate of $30.3 billion, according to Thomson Reuters I/B/E/S. Still, operating income margins dropped to 22 percent from 27 percent a year ago.
Alphabet’s profit margins have fallen in recent quarters as it ramps up costly new projects in cloud computing and hardware at its core Google unit, and despite spending cuts on an unprofitable set of ancillary initiatives known as “other bets.”
Overall, quarterly profit of $9.4 billion, or $13.33 per share, exceeded estimates of $6.56 billion, or $9.28 per share, according to Thomson Reuters I/B/E/S. About $3.40 of the earnings per share were attributable to a new accounting method for unrealized gains in Alphabet’s investments in startups such as Uber Technologies Inc [UBER.UL].
Excluding the investment-related gains and other items, adjusted earnings were $9.93 per share, topping the $9.28 per share consensus. Alphabet’s effective tax rate dropped to 11 percent