Google Revenue Hits Record on Ad Sales Surge

Google's core business brought in $24.1 billion during Q3 but it remains to be seen whether its "Other Bets" will ever be as important.
Matthew HellerOctober 27, 2017

Google parent Alphabet’s stock price rose above $1,000 after it reported record quarterly revenue driven by a 21% increase in revenue from its core advertising business.

Revenue for the third quarter totaled $27.77 billion, with $24.1 billion, or about 87%, of that coming from Google ad sales. Alphabet also posted $7.8 billion in profit for the quarter, up about 35% from the same period a year earlier, while adjusted earnings were $9.57 per share.

Analysts had expected EPS of $8.33 per share on revenue of $27.2 billion. In after-hours trading Thursday, Alphabet shares climbed 2.5% to $1,019, bringing the stock’s surge to about 29% for the year.

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“We’re solving big problems and making products that billions of people use every day,” CFO Ruth Porat told CNBC. “And fundamental to all of this is our focus in building products with AI at their core, and we believe Google is leading the way here.”

Aggregate clicks on Google ads also beat estimates, rising 47%. And Google’s cost-per-click — a key metric that helps define how valuable its ads are — grew 1% quarter-over-quarter.

“While still down 18% year-over-year, that tiny nudge forward is likely going to be a big positive signal for Google as it looks to show that its advertising business won’t be challenged by other platforms,” TechCrunch said.

It also cost Google more, however, to attract traffic from its web partners. Traffic acquisition costs (TAC) increased 31.5% to $5.502 billion and TAC accounted for 23% of Google’s advertising revenue, up from 21% a year ago.

“Wall Street may be watching [TAC] pretty closely as Alphabet’s story continues to play out and it starts to set up its ‘other bets’ to succeed,” TechCrunch said, referring to the collection of startups that make up Alphabet outside of Google.

Third-quarter revenue from Other Bets rose 53.3% to $302 million and the segment’s loss narrowed to $812 million from $861 million.

“It’s unclear whether those so-called Other Bets will ever be as important to Alphabet’s bottom line as its search engine has been,” Quartz said.