Google exceeds third-quarter expectations, advertising and cloud revenue soar

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Google parent alphabet (GOOG, GOOGL) published its results for the third quarter of 2020 after the closing bell on Thursday, beating analysts’ expectations and providing greater insight into the effect of the coronavirus pandemic on digital advertising.

It is important to note that the report follows the long-awaited decision of the Ministry of Justice antitrust lawsuit alleging Google engages in anti-competitive behavior to maintain dominance in the search and search advertising industries.

Here are the most important numbers of the quarter compared to what analysts expected from the company, as compiled by Bloomberg.

Turnover excluding TAC: $38.01 billion vs $35.35 billion expected

Earnings per share: $16.40 vs $11.42 expected

Shares of the company rose 4% immediately after the announcement.

“Total revenue of $46.2 billion in the third quarter reflects broad-based growth driven by increased advertiser spending in search and YouTube as well as continued strength in Google Cloud and Play,” said Ruth. Porat, Alphabet’s chief financial officer, in a statement.

CEO of Alphabet Inc. and its subsidiary Google LLC, Sundar Pichai, appears on a monitor as he testifies remotely during a hearing to discuss the reform of Section 230 of the Communications Decency Act with large technology companies on October 28, 2020 in Washington, DC (Photo by MICHAEL REYNOLDS/POOL/AFP) (Photo by MICHAEL REYNOLDS/POOL/AFP via Getty Images)

Google’s cloud platform brought in $3.44 billion in the quarter, up from $2.38 billion in the same quarter last year. The company is fighting to position itself in the cloud wars behind Amazon, the market leader, and Microsoft, which takes second place. YouTube, meanwhile, saw revenue of $5.04 billion, up from $3.80 billion in the third quarter of 2019.

Other tech giants also reported earnings on Thursday, including Amazon, Appleand Facebook.

An antitrust battle that could last for years

Google’s larger narrative, however, has to do with what is expected to be its years-long antitrust lawsuit. So far, investors have been unimpressed with the Oct. 20 announcement. That’s likely because, according to legal experts, Google won’t be forced to part ways. Instead, there’s a good chance the company will reach an agreement with the DOJ requiring it to change its business practices.

In response to the lawsuit, CEO Sundar Pichai said the company is confident that “our products create meaningful benefits for consumers and will confidently advance our case.”

He added that the company will continue to focus on creating a search product “that people love and appreciate.”

Interestingly, the lawsuit helped shed light on Google’s revenue-sharing deal with Apple (AAPL) which ensures that Apple uses Google’s default search engine for its Siri, Spotlight and Safari web searches. The deal earns Apple between $8 billion and $12 billion a year, according to the lawsuit. The lawsuit also alleges that nearly 50% of Google’s search traffic came from Apple devices in 2019.

But Apple, according to the Financial Timesseems to be working on its own type of search engine, which could spell trouble for Google’s future.

Then there are the ongoing conversations surrounding the changes to Section 230 of the Communications Decency Act. Republican and Democratic lawmakers hope to change the law, which shields websites from liability for “good faith” moderation of user-generated content and serves as a fundamental building block of the modern internet.

Just as important as how Google responds to its various outstanding issues will be its quarterly performance going forward.

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