Alphabet reports an increase in revenue and announces shares buyback plan
Google's parent company, Alphabet Inc recorded a better than expected revenue after its third-quarter report shows that its revenue has increased by 13 percent. The great return report, together with an announcement of buyback for its class C shares had sent the company's share price to break previous resistance to a new high.
According to Reuters, Alphabet revenue for the third quarter has jumped to $18.68 billion from $16.52 billion from its third-quarter revenue report for 2014. The revenue report beats analysts expectation by $150 million.
According to an analyst, the better than expected revenue means that Google strategy of creating a new parent company the Alphabet together with structuring is a success as the company manage to keep their expenses low.
Alphabet Inc. announcement for share buyback plan is also welcomed by investors as its share saw a huge movement as investors slowly start to buy its stock. The company is expected to buyback up to $5.09 billion of its class C shares a move that translate to a firm company's earning.
Street Insider reported that Alphabet shares jump 11 percent to its new high of $722.53. Based on the company's net income, its class A and class B shares will give investors a return of $5.73 per share.
Alphabet said that most of the company's revenue came from the increasing amount of advertising done through its holding; Google and YouTube. The company said in a statement that the revenue from ads alone contributes to $16.78 billion in just three months. The increase in the use of online advertising is due to the drop in the average price of online ads.
Kerry Rice, an analyst for Needham & Co told Channel News Asia that Alphabet is "in a great position in the overall advertising space, whether it's search, display or mobile. They've got the right program to continue to grow at a solid pace and be dominant in those spaces."
The high revenue report also signals that Google had managed to overcome the problem of getting more revenue through mobile advertising. Previously, other companies including Facebook announces that its advertising revenue from the mobile device is lesser compared to the desktop.
However, some analysts are sceptical whether Alphabet can continue to grow well giving the growing number of new rivals and the fact that most of the ads revenue comes from its YouTube holding. The transition of users from desktop to mobile also needs to be given serious attention by Alphabet to make sure the company will be able to continuously get more revenue from the mobile users.