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Alphabet’s Q2 profit triggers rally, despite $5.1B EU fine

UPDATED: Mon., July 23, 2018, 7:37 p.m.

Alphabet stock is shown on a screen at the Nasdaq MarketSite on July 25, 2017, in New York. (Mark Lennihan / Associated Press)
Alphabet stock is shown on a screen at the Nasdaq MarketSite on July 25, 2017, in New York. (Mark Lennihan / Associated Press)

MENLO PARK, Calif. – Google parent Alphabet on Monday reported second-quarter earnings that pleased Wall Street, even as it booked a $5.1 billion charge to cover a fine levied by European regulators.

The company reported a profit of $3.2 billion for the three months that ended June 30.

Google has said it will appeal the European fine but Alphabet accounted for it on its books nonetheless. Excluding that amount, the Mountain View, California, company’s earnings came to $11.75 per share, which topped the $9.45 per share expected by analysts surveyed by Zacks Investment Research.

Alphabet Inc.’s stock jumped 3.6 percent in after-market trading.

Europe’s Competition Commission last week accused Google of unfairly forcing handset makers to take its Chrome, Search and Play Store apps when using its free Android mobile system. While Google has said it will appeal, it has until mid-October to adjust its behavior.

Some observers speculated the ruling might make it impossible for Google to continue to make Android available for free, which lowers the price of smartphones and enables Google to make more money from ads.

Google CEO Sundar Pichai dismissed those fears on a call with investors.

“I’m confident we can find a way to make sure Android is available at scale to users everywhere,” he said.

Last week’s European fine came about a year after Google was stung by a similar $2.7 billion fine that the EU said was for favoring its shopping listings in search results. The EU has one other case against Google regarding its AdSense advertising platform for publishers that is still ongoing.

“There is no end in sight, I feel like, for fines from the European Union for companies like Google and Facebook,” said Forrester analyst Collin Colburn. “That’s going to raise more and more questions about Google’s business.”

The internet search leader posted revenue of $32.66 billion in the period, up 26 percent, driven by ad revenue from mobile searches. After subtracting Alphabet’s advertising commissions, revenue was $26.24 billion, also exceeding Street forecasts of $25.64 billion.

Through the close of regular-session trading Monday, Alphabet’s stock had risen 15 percent since the beginning of the year, while the Standard & Poor’s 500 index has risen 5 percent.


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