Alphabet and Amazon wind up stellar quarter for United States tech big five

Alphabet – which competes with all of the other four companies in either advertising, cloud computing, or operating systems – showed that efforts to push its vast ad business toward mobile were paying off, calming fears that the company’s best days were behind it.

Shares of Alphabet (GOOGL) are advancing 4.59% to $801 in pre-market trading on Friday, after beating analysts’ estimates for its fiscal 2016 second quarter earnings and revenue on Thursday.

“Marketers are flooding into mobile because they are seeing a more effective return”, he said in a note to investors.

Its core Google business, which includes search, Android, YouTube, and advertising and related services, saw revenue in the three months to 30 June surge to US$21.32 billion (€19.21 billion) from $17.65 billion a year earlier. Over the past year, Google, Facebook and Twitter have all doubled down on video, a format where advertisers are willing to pay a premium for a few seconds of users’ undivided attention.

To improve video recommendations to users, Google has used artificial intelligence which has brought more engagement on the site. The operating margin expanded more than 50 basis points from a year ago, resulting in operating income of $6 billion.

While Google grew an impressive 21%, Facebook recently announced earnings results that show 59% growth over the past year.

The rivalry between the companies has intensified as advertisers shift more of their budgets towards mobile.

The conglomerate reported that from the revenue of $21.5 billion in the second quarter of this year, $21.31 billion came from Google and only $185 million came from other operations.

Google’s advertising business, its biggest contributor to the revenues, grew 19% in the quarter to $19,143 million (nearly Rs 1.27 lakh crore) from the $16,023 million (nearly Rs 1.07 lakh crore) posted in the same period previous year.

Google’s advertising model now faces a trade-off. In fact, the company’s “Other Bets” portfolio, which includes Google Fiber, connected home company Nest, and founder Larry Page’s moonshots, lost about $859 million this quarter-even more than it did last quarter. However, Ruth Porat, the keen financial disciplinarian (Chief Financial Officer) has vowed to keep a closer watch on these new businesses.

“It’s a big set of changes, and it’s obviously having an impact”, he said.

Despite the strong revenue growth, the falling cost-per-click on advertisements was cause for concern, Moor Insights & Strategy analyst Patrick Moorhead said. This is especially good news following Alphabet’s lackluster first-quarter earnings, which disappointed when the company missed analyst estimates of $20.38 billion in revenue.