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Alphabet beats expectations with $27.8bn in Q3 revenues

Tim Maytom

Google’s parent company Alphabet has surpassed Wall Street expectations with its Q3 financial results, sending stock prices up as quarterly revenues grew 24 per cent year-on-year to $27.8bn (£21.2bn), largely driven by mobile search and YouTube advertising. Net income for the quarter was also up around 33 per cent year-on-year, to $6.7bn.

Growth was relatively consistent across the globe, with APAC and South America seeing the biggest increase in revenues, at 29 per cent and 33 per cent year-on-year respectively. US revenues grew by 21 per cent, while EMEA was up 23 per cent. Looking at other metrics, cost-per-click was up one per cent quarter-on-quarter. While still down 18 per cent year-on-year, this is a crucial positive signal for Google as it shows its core advertising business is still alive and kicking in the age of mobile.

There were some warning signs, however. Traffic acquisition costs (TAC) were up 32 per cent year-on-year to $5.5bn, as the strongest growth areas for the ad business were in mobile search and programmatic, which traditionally have higher TAC rates than standard search or display. Total TAC as a percentage of ad revenues was also up year-on-year, and while this was slightly offset by a favourable revenue mix shift from network to sites, the ongoing shift to mobile could present some worries for Google further down the line.

As well as its advertising products, Google executives were keen to highlight other sources of revenue, like Google’s cloud computing business and its small by growing line of hardware products. Non-advertising revenues were up around 40 per cent year-on-year, good news as Google seeks to diversify its business somewhat, but these still only totalled $3.7bn, less than 15 per cent of its revenues.