Alphabet’s Share Price Drops Following Q2 2017 Results

The company reported revenue of $26.1 billion, a 21 percent increase from the same quarter in 2016.

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Tech giant Google-parent Alphabet (NASDAQ:GOOGL) released its Q2 2017 results on Monday (July 24), but that didn’t stop its share price from tumbling, despite an overall growth in revenue. 

According to the company’s press release, Google reported revenues of $26.01 billion in earnings for the quarter, up 21 percent compared to the same quarter in 2016.

“We’re delivering strong growth with great underlying momentum, while continuing to make focused investments in new revenue streams,” Ruth Porat, CFO of Google/Alphabet said in the release.

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The company also reported that in order to compare its current quarter performance to previous periods, the $2.7 billion fine from the European Commission (EC) was highlighted to reflect its impact in revenue, operating income, net income, and diluted EPS.

Since Monday, Google’s share price has dipped 2.53 percent–representing roughly a $30 drop–to $972.27 as of 1:51 p.m. EST on Tuesday (July 25).

That said–despite the company’s increase in revenue–Reuters reported that the company’s investors aren’t pleased–which might explain its drop in share price. The article goes on to say that much of the company’s revenue has resulted in a rising TAC (traffic acquisition costs), which it states is one of the “few things” that makes its investors “unhappy.”

Google/Alphabet’s release states that the total cost of of TAC was $5,091 for the quarter, up from $3,975 for the same quarter last year, which equals a 28 percent increase for the quarter.

According to analysts in the Reuters article, the percentage increase in TAC is the biggest in nine years.  The publication goes on to say that Google “relies heavily” on partners like Apple (NASDAQ:AAPL) for TAC because it has made Google the default web browser on the iPhone.

“The company continues to cite mobile and programmatic as drivers of overall increases in TAC, which we believe will likely continue to increase in absolute terms and as a percentage of revenue for the foreseeable future,” Goldman Sachs analysts stated in a note to clients.

Similarly, in a conference call with analysts, CNBC reported that Porat said the company does expect the TAC costs to increase. Porat continued, stating that Alphabet is focused on “dollar growth, not margins.

Despite the company’s share price drop since Monday, on a year-to-date basis shares of Alphabet have still made positive gains, rising 22.23 percent overall.

Don’t forget to follow us @INN_Technology for real-time news updates!

Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.

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