EU Antitrust Fine Stings Google Parent Company Alphabet Bottom Line With A 27 Percent Drop In Profits
About a month ago, Google was hit with a massive fine by the EU that totaled $2.7 billion. That fine was levied against Google for breaching EU antitrust law and was more than twice as much as the second largest penalty the EU ever handed out for such a violation. That previous record high fine was leveled against Intel back in 2014.Understandably, the massive fine hit Google's parent company, Alphabet, hard in its recent quarterly earnings. The fine pushed Alphabet's bottom line down 27.7% for the quarter and was handed down after EU regulators found that Google was giving its own shopping service favorable placement in search results. Regulators are also looking into Google's dominance in search results and smartphone operating systems.
While profits are down for the quarter, Alphabet is still doing extremely well this year. Through the close of trading on Monday shares in the company were up 26%. Shares did fall about 3% in trading after the bell to $969 per share. The upside for Alphabet is that on a consolidated basis, revenue for the company did grow significantly during the quarter to the tune of about 21% according to the earnings press release.
"With revenues of $26 billion, up 21% versus the second quarter of 2016 and 23% on a constant currency basis, we're delivering strong growth with great underlying momentum, while continuing to make focused investments in new revenue streams," said Ruth Porat, Alphabet CFO.
As the biggest earner for Alphabet, Google accounted for the majority of earnings during the quarter, even if it also accounting for the earnings decline due to the fine. Google alone saw profits rise 18.4% to $22.67 billion. Expectations are for Google and Alphabet to continue on an earnings spree in 2017 with around $73.75 billion in ad revenue globally expected. While the fine levied against Google in the EU was huge, it certainly won't break the bank at Alphabet, and represents a mere annoyance for the search giant and its parent company.