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Profits at Google’s Parent Slump on Huge Fine

July 24, 2017, 8:18 PM UTC

Alphabet reported a 27.7% drop in quarterly profit as the company recorded a previously announced charge related to a record $2.7 billion fine imposed on its Google unit by the EU.

EU antitrust regulators last month hit Google with a record 2.4-billion-euro ($2.7 billion) fine for favoring its own shopping service, taking a tough line in the first of three probes of its dominance in searches and smartphone operating systems.

The company’s shares (GOOG), which closed marginally up in regular trading on Monday, fell nearly 3% to $969 after the bell.

The shares had gained nearly 26% this year through Monday’s close.

On a consolidated basis, revenue rose about 21% to $26.01 billion in second quarter ended June 30, beating the analysts’ average estimate of $25.65 billion, according to Thomson Reuters I/B/E/S.

Revenue was boosted by robust demand for advertising on mobile and the company’s popular video service YouTube.

Google’s ad revenue, which accounts for a lion’s share of its business, rose 18.4% to $22.67 billion.

The company faces intensifying competition from social media giant Facebook Inc for advertising dollars. The companies together dominate the online ad market.

This year, Google is expected to generate about $73.75 billion in net digital ad revenue worldwide, a 17.8% jump from a year earlier, according to research firm eMarketer.

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Paid clicks, where an advertiser pays only if a user clicks on ads, rose 52%. Analysts on average had expected a rise of 35.2%, according to data and analytics firm FactSet.

Paid clicks rose 44% in the first quarter.

Revenue from its Google Other unit, which includes Pixel smartphone, Play Store and cloud business, rose 42.3% to $3.09 billion.

The company’s net income fell to $3.52 billion, or $5.01 per Class A and B share and Class C capital stock, in the second quarter from $4.88 billion, or $7 per share, a year earlier.

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Analysts had expected earnings of $4.49 per share.

The company changed the method it reports earnings in the first quarter, focusing on Generally Accepted Accounting Principles (GAAP) earnings instead of non-GAAP results.