Google's parent company beat profit estimates in the second quarter.
Alphabet's shares also rose, according to analysts, on expectations that the increase in expenses will stabilize.
(Reuters)- Alphabet, Google's parent company, reported on Monday that its profit margin rose in the second quarter, giving investors a long-awaited sign that expenses are coming under control.
The company's high traffic acquisition costs, a key expense, fell for the first time in three years compared to the same period last year. Operating margin rose to 24 percent excluding a $5 billion antitrust fine, from 22,5 percent in the last quarter.
Adjusted earnings per share were $10,58, exceeding the average estimate of $9,52 in a Thomson Reuters poll. Some analysts excluded other items, and Alphabet also beat the consensus of $9,59. Alphabet reported earnings per share of $11,75 before adjustments, a figure that excludes $1,1 billion in investment income from an accounting entry for unrealized gains, and a fine from the European Commission. Google appealed the decision, which found it guilty of abuse in mobile application software.
Alphabet reported revenue of $32,66 billion in the quarter, 86 percent of which came from Google's advertising business, exceeding the average projection of $32,2 billion.
Google's dominance in online advertising was challenged this year by the antitrust battle over its Android mobile software and other regulatory actions. The issue has not yet been overcome by Google, whose quarterly revenue has grown by at least 20 percent annually for two consecutive years.
A new privacy law, enacted by the EU in May, led the company to revise user privacy disclosures and tighten up how it shares data with advertising clients. Google also adjusted its price comparison service in an effort to comply with an EU ruling from last year and plans to soon announce changes to how it handles political ads.
Alphabet's shares also rose, according to analysts, on expectations that the increase in expenses will stabilize. Still, Alphabet's outlook remains tempered by cost concerns, said Michael Graham, an analyst at Canaccord Genuity, in a report this month.
Amazon's encroachment on advertising has threatened Google's lucrative deals with media companies and advertisers. At least three analysts who follow Google said this year that separating its various advertising businesses into financial results would help investors understand how the competition is affecting the company.
By Paresh Dave and Arjun Panchadar