Alphabet Surpasses All Expectations

Advertising revenue grew to $19 billion, up nearly 20% from a year ago, driven by continuing strength in mobile search and video ads. Paid clicks increased 29% from the prior year, driven by more ad volume and user engagement with different ads on mobile devices. However, this was partially offset by a 7% decline in cost-per-click. Given the mix shift toward mobile, lower cost-per-click shows that advertisers are still willing to pay more for desktop search ads. Other drivers of ad revenue growth during the quarter were YouTube’s TrueView opt-in video ads, along with DoubleClick’s programmatic ads. Google’s other revenue grew 33% to $2.2 billion, helped by growth in Cloud and overall sales in Google Play. Revenue in Alphabet’s Other Bets segment grew 150% year over year to $185 million, driven mainly by sales of Nest products and revenue from Fiber.

The operating margin expanded more than 50 basis points from a year ago, resulting in operating income of $6 billion. This expansion was due primarily to a higher gross margin as traffic acquisition cost was down slightly as a percentage of ad revenue.

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