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Alphabet, even with record EU fine, remains a money machine

The EU calls Google a monopoly. That’s not the only battle its parent company is fighting. Alphabet is also tussling with the US Department of Labor -- and Uber.

Richard Nieva Former senior reporter
Richard Nieva was a senior reporter for CNET News, focusing on Google and Yahoo. He previously worked for PandoDaily and Fortune Magazine, and his writing has appeared in The New York Times, on CNNMoney.com and on CJR.org.
Richard Nieva
3 min read
Watch this: Alphabet's still raking in the cash, despite EU's fine

Alphabet, the parent of Google and one of the most powerful companies in the world, is fighting a big antitrust battle in Europe and other fronts. Even so, it's still a cash cow.

Last month, the European Commission for the first time called Google's search engine a monopoly and fined the company $2.74 billion for favoring its shopping ads over those of competitors. Google is expected to appeal the ruling, but in the meantime, it's taking the hit in its finances and set aside those funds for the fine. Google's chief accountant Amie Thuener explained the math on June 30.  

Still, in the quarter ended June 30, Alphabet beat analyst estimates for sales and profit. Earnings per share were $5.01. Analysts originally expected profit would be $8.25 per share, but cut that number almost in half to $4.49 to factor in the fine, according to Reuters estimates. 

Alphabet also racked up $26.01 billion in sales. That's up 21 percent from a year ago and better than analyst forecasts of $25.6 billion.

"We're still early in our analysis of the decision and next steps," Ruth Porat, Alphabet's finance chief, said on a conference call with analysts in reference to the antitrust case in Europe. "The main thing is we're very focused on helping users and advertisers and are reviewing our options." She said she couldn't comment further because it's an ongoing legal matter. 

Earlier in the day, Alphabet also announced Sundar Pichai -- who leads Google, Alphabet's largest and only moneymaking unit -- is now a member of Alphabet's board. He joins Google co-founders Larry Page and Sergey Brin, as well as veteran venture capitalist John Doerr and former Ford CEO Alan Mulally.

Not the only battle

The company's latest financial snapshot comes as Alphabet is reckoning with its outsized influence on the world. Aside from the European Commission fine, the US Department of Labor has been investigating Page and his team for possible gender pay inequality.

And earlier this year, the company was dealing with the fallout of a major controversy involving ads on YouTube being placed alongside videos from hate groups and extremists. Several big-name advertisers, including Pepsi, AT&T and Johnson & Johnson, boycotted the company.

Meanwhile, Alphabet's Waymo unit has been in a very public -- and sure-to-be expensive -- tussle with Uber over self-driving cars. The crux of the case is a trove of 14,000 documents allegedly stolen by former Google engineer Anthony Levandowski. He joined Uber last year and the ride-hailing company fired him in May.

The fine from European regulators is a drop in the bucket for Alphabet -- which had profit of $19.5 billion last year -- but the antitrust case could mean Google has to change the way it runs search, its biggest business. But those possible changes remain to be seen. That's important because Google's digital ads, which compete primarily with Facebook's ads, account for around 90 percent of Alphabet's revenue. 

Outside of ads, though, Alphabet is well-known for its moonshots -- like self-driving cars or balloons meant to beam Wi-Fi down to remote regions of the world. On Monday, Google said those projects, which it calls "Other Bets," are losing less money than they used to. They lost $772 million in the second quarter, versus $855 million over the same period last year. 

First published July 24 at 1:25 p.m. PT.
Update, 3:31 p.m. PT: Adds comment from Alphabet's conference call with analysts. 

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