Alphabet Inc, the parent company of Google, has exceeded expectations and reported record profits for the third quarter. The company’s advertising revenue from Google saw a tremendous increase of 41%, reaching $53.1 billion during this period. This surge in demand can be attributed to the pandemic, which has resulted in people spending more time online and continuing their online habits.

Overall, Alphabet’s sales reached $65.1 billion, surpassing the average estimate among analysts. However, the company’s shares experienced a slight decline of 0.69% following the release of the financial results. Nonetheless, quarterly profits were impressive at $18.936 billion, or $27.99 per share, surpassing the expected $24.08 per share. This marks the third consecutive quarter of recording record profits for Alphabet.

Alphabet’s profits can fluctuate significantly due to accounting rules that require the company to measure unrealized gains from its investments in startups as income. Additionally, concerns about how companies like Google use browsing behavior to profile users and select ads have become widespread. Apple Inc’s recent update, allowing users more control to stop tracking, has impacted the third-quarter sales of Google’s competitors such as Snap Inc and Facebook Inc.

However, Google’s search engine may have been less affected by these changes. It collects valuable user interest data that is unmatched in the industry. Furthermore, Google Cloud saw a 45% increase in revenue, reaching $4.99 billion, although slightly below estimates.

Alphabet’s total costs for the third quarter increased by 26% to $44.1 billion, and the company now employs over 150,000 individuals. Despite these costs, Alphabet’s shares have outperformed those of its peers, with a 57% rise since the end of last year. However, Alphabet’s shares still trade at a slight discount compared to Facebook, the second-largest seller of online ads.

Google has faced challenges due to the scrutiny of its market power, with authorities alleging anticompetitive practices in its advertising and search practices. Google argues that these practices are intended to benefit users. In response to criticisms, Google announced plans to reduce the fees it collects from apps on its Play app store starting next year. This move may potentially generate new revenue for Google if it encourages companies like Spotify Technology SA to offer subscriptions through their apps.

Alphabet Inc’s strong financial results for the third quarter highlight the success of its advertising business, particularly within Google. Despite industry challenges and scrutiny, the company continues to thrive and deliver record profits. Investors and industry observers remain attentive to further developments in Google’s business strategies.

Useful links:
1. Alphabet Inc – About Us
2. Alphabet Inc – Investor Relations