Alphabet profit slumps on record $2.7B US fine by European Union

Alphabet Inc. reported a 27.7 percent drop in quarterly profit as the company recorded a previously announced charge related to a record fine imposed on its Google unit by the EU.

EU antitrust regulators last month hit Google with a record 2.4-billion-euro ($2.7 billion US) fine for favouring its own shopping service, taking a tough line in the first of three probes of its dominance in searches and smartphone operating systems.

• Meet the small business owners who first pitted Google against the European Union
• EU fines Google $2.7 billion in anti-trust suit

The company's shares, which closed marginally up in regular trading on Monday, fell nearly three per cent to $969 US after the bell.

The shares had gained nearly 26 per cent this year through Monday's close.

On a consolidated basis, revenue rose about 21 per cent to $26.01 billion US in second quarter ended June 30, beating the analysts' average estimate of $25.65 billion US, according to Thomson Reuters I/B/E/S.

Revenue was boosted by robust demand for advertising on mobile and the company's popular video service YouTube.

Google's ad revenue, which accounts for a lion's share of its business, rose 18.4 per cent to $22.67 billion US.

• Google to stop reading your Gmail to help sell ads
• Google tweaks search engine to consolidate job openings in results

The company faces intensifying competition from social media giant Facebook Inc for advertising dollars. The companies together dominate the online ad market.

This year, Google is expected to generate about $73.75 billion US in net digital ad revenue worldwide, a 17.8 per cent jump from a year earlier, according to research firm eMarketer.

Paid clicks, where an advertiser pays only if a user clicks on ads, rose 52 per cent. Analysts on average had expected a rise of 35.2 per cent, according to data and analytics firm FactSet.

Paid clicks rose 44 per cent in the first quarter.

Revenue from its Google Other unit, which includes Pixel smartphone, Play Store and cloud business, rose 42.3 per cent to $3.09 billion US.

The company's net income fell to $3.52 billion US, or $5.01 per Class A and B share and Class C capital stock, in the second quarter from $4.88 billion US, or $7 per share, a year earlier. 

Analysts had expected earnings of $4.49 US per share.

The company changed the method it reports earnings in the first quarter, focusing on Generally Accepted Accounting Principles (GAAP) earnings instead of non-GAAP results.