Amid a global debate about internet and data privacy, Google’s parent company Alphabet Inc. posted surging profits based on advertisers' spending who are still swarming to the search giant.
Alphabet released its profits for the first three months of 2018, which hit $9.4 billion up from $5.4 billion a year earlier. The company's bottom line was buoyed by the continued strength of its ad sales business. Google's sales for the quarter jumped 26% to $31.1 billion. Its ads business accounted for $26.6 billion of that. Alphabet also benefited from a lower effective corporate tax rate of 11%, compared to 20% a year earlier, thanks to the Trump’s Administration tax reforms.
Overall, Google’s 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.
Google’s reportings come as the tech industry’s outlook towards the data privacy of its users is under governmental scrutiny. The CNN reports that Google is the first of the major tech platforms to report earnings since news of the Cambridge Analytica scandal broke. The scandal has also retrospectively impacted the stocks of companies like Google and Twitter, which primarily make their revenue by collecting personal user information and using it to sell targeted ads to companies.
A sweeping new data protection law, called General Data Protection Regulation (GDPR), is set to take effect across the European Union next month. Goldman Sachs analysts estimate the bill could cut Google's ad revenue by as much as 2%. Alphabet’s first-quarter results again showed that advertisers’ attraction to Google’s powerful user targeting systems is strong, which could help it rebound from any privacy setbacks.
On a conference call with analysts Monday, Google CEO Sundar Pichai downplayed the potential impact of Europe’s new privacy laws by noting that most of its ad business is from search ads, which requires "very limited information" from users. "We are focused on getting the compliance right," Pichai said on the call, noting that Google has spent the past 18 months working to comply with GDPR. "We think we will be able to do all that with a positive impact for users and publishers and advertisers, and so, our business."