Google parent Alphabet's profit soars on strong ad sales

Google parent Alphabet Inc posted a surge in profit on Thursday, underscoring that despite concerns about an advertiser revolt on YouTube, the popular video streaming site remains the engine of its growth.

Wall Street grew anxious as a series of high-profile advertisers fled YouTube amid concerns about ads appearing alongside extremist content. But Google's results showed that controversy was little more than a speed bump for the company as quarterly profit climbed 29 percent.

"YouTube revenues continue to grow at a significant rate, driven primarily by video advertising," Alphabet Chief Financial Officer Ruth Porat said during an earnings call.

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Alphabet's net income rose to $5.43 billion, or $7.73 per Class A and B shares and Class C capital stock, in the first quarter ended March 31 from $4.21 billion, or $6.02 per share, a year earlier.

Shares of the company rose 2.8 percent to $916.80 after the bell on Thursday.

Analysts marveled at the company's ability to continue to post sizeable year-over-year gains from such a large base.
“For a company of Google’s size to post the growth that it has is just a testament to the quality and usefulness of the products they make," said Colin Gillis, an analyst with BGC Partners. “They are the dominant force in digital advertising."

Google's ad revenue, which accounts for the lion's share of its business, rose 18.8 percent to $21.41 billion in the first quarter.

The company is locked in a battle with social media company Facebook Inc in the fast-growing mobile advertising market.

Google is expected to command a 61.6 percent share of the search ad market worldwide in 2017, up from 60.6 percent in 2016, according to research firm eMarketer.

Paid clicks, where an advertiser pays only if a user clicks on ads, rose 44 percent. Analysts on average had expected a rise of 29.7 percent, according to FactSet StreetAccount.

With the traditional business of search advertising maturing, the company is looking to YouTube as its next driver of growth.

The strong results also allayed concerns about a recent controversy surrounding the video service and its impact on Google's ad revenue.

YouTube had come under fire for ads appearing alongside videos carrying homophobic or anti-Semitic messages, prompting a number of companies to suspend their digital ads on the video service.

“Advertisers can be fickle and certainly the approval of the advertiser is critical, but less so than the approval of the user," said Phil Bak, CEO of ACSI Funds, an asset manager.

Alphabet is also reaping the benefits of investing heavily in areas such as hardware and cloud.
Revenue from its Google Other unit, which includes Pixel smartphone, Play Store and cloud business, rose 49.4 percent to $3.10 billion.

The company's consolidated revenue rose 22.2 percent to $24.75 billion from $20.26 billion.

Analysts on an average had expected a first-quarter profit of $7.34 per share, according to Thomson Reuters I/B/E/S.