Alphabet Inc., parent company of Google, reported on its third quarter financial results and the numbers are a pleasant surprise. Selling more ads, coupled with efficient cost management, drove the stocks and revenue up for Google.
The accelerated growth materialized in a cash balance of almost $73 billion, which allowed the tech giant to buyback $5.1 billion in Class C stock. The transaction was a premiere for Google and it had elevated its rising shares even more, causing the stocks to go up 11 percent following the announcement of the buyback.
"It's moving in the right direction," senior analyst at Needham & Co. Kerry Rice, said.
Thursday, the company stated that the third quarter brought a 15 percent increase in revenue, surpassing analysts' predictions. Not only that Google earned $100 million more than the average estimate, but its shares also fared better than expected. Although Wall Street experts approximated the price per share at $7.20 for the end of Q3, the actual price was about $7.35.
Alphabet holding company was created in order to make sure that Google focuses on its core businesses, which include YouTube, searching and advertising.
In the following quarter, Alphabet aims to increase its transparency and for that it will detail the financial results per division. The revenues, outgoings and net profits for all the holding's units will be made public, CFO Ruth Porat pointed out.
Porat mentioned that an important factor for the growth came from mobile search. During Q3, the number of Google searches from desktop devices was for the first time less than those made from mobile gadgets. India is one place where the mobile search is increasingly popular.
Television producers start to understand the consumers' shift in paradigm, leading to an increased investment in YouTube ads. This caused the income from YouTube advertising to spike at a "significant rate," according to Porat.
Google CEO Sundar Pichai addressed the companies' investment plans in cloud services for businesses, an area where Microsoft Azure and Amazon Web Services are strong competitors. "[Google is] investing a lot and playing for the long term," Pichai explained.
In comparison with the 2014 results, Google's global revenue increased by 13 percent, to $18.7 billion. This translated into a net profit of $3.9 billion, 45 percent more than in the former year.
It seems that for Google, the only Achilles heel is the aggregate paid clicks. The search engine company reported a 23 percent increase in the number clicked ads, but a decrease of 11 percent in the profitability of those clicks. The downward trend for paid clicks is consistent throughout 2015.
