UPDATE 2-Alphabet second-quarter revenue beats estimates; shares soar

Alphabet Inc reported quarterly revenue and earnings that beat expectations on Thursday, easing concerns about the short-term growth challenges facing Google, YouTube and the company's other advertising businesses even as it faces antitrust investigations. Revenue rose 19% to $38.94 billion, compared to average estimates for 16.82% growth and $38.15 billion in revenue among financial analysts tracked by Refinitiv.

Shares rose nearly 8% to $1,225 following the results in after-hours trade, after closing little-changed in regular Nasdaq trade. The results brought Alphabet closer to the 20% revenue growth it had generated for several years before posting 17 percent growth in the first quarter this year, which had sent shares falling.

Alphabet generates about 85 percent of its revenue from tools used in online advertising or the ad space itself. In the first quarter, executives said results were affected by exchange rates for foreign currency, competition and an unspecified product change that had boosted results in the year-earlier period.

During the second quarter, Google announced several new advertising tools, including ads on the home page of its Google mobile app as well as new types of ad campaigns spanning YouTube and Gmail. The second-quarter results showed greater revenue than analysts had anticipated from both Google's advertising and non-advertising businesses.

Ad clicks on Google's properties rose 6% compared to the first quarter, when they had fallen 9%. The number of ads shown on websites and app with which Google partners held steady compared to last quarter. Alphabet's quarterly costs at $29.764 billion were about flat with the same period a year ago. Alphabet last year began spending more on hiring for its cloud computing division, acquiring and policing content, developing artificial intelligence capabilities and adding facilities.

The second-quarter operating margin was 24%, up from 18% in the first quarter. Net income for the second quarter rose to $9.95 billion, or $14.21 per share, from $3.2 billion, or $4.54 per share, a year earlier, when it recorded a $5 billion charge related to a fine by European antitrust regulators for abusing its dominance in mobile software. Analysts' average estimate for quarterly net income was $8.024 billion, or $11.32 per share.

Shares of the company have lagged its peers this year, rising about 10%, compared to about 20% growth for the S&P 500 members broadly. Intensifying regulatory scrutiny has been a major concern for investors, according to financial analysts. On Thursday, the Texas attorney general's office announced that a bipartisan group of state attorneys general is weighing a range of antitrust actions against big tech companies.

Reuters reported last month that the U.S. Federal Trade Commission was gearing up to investigate Google over complaints of anti-competitive behavior. Facebook Inc, along with the release of its earnings on Wednesday, said the FTC had informed it last month that it was under antitrust investigation. Tthe social media giant also acknowledged a broad U.S. Department of Justice antitrust review of large internet companies.

Alphabet in its earnings release on Thursday did not mention any investigations. Antitrust complaints lodged against Google by rivals and other critics span its advertising, app store, search and other businesses.

But speculation also has mounted about how a series of other challenges could be combining to slow the company. The online ad industry has matured in some countries faster than it is growing in developing ones. Google is running into new privacy laws and technologies affecting its ability to charge the typical premium on some ads. And the industry has seen a step back from advertisers wary of associating with fake news, borderline hate speech and other topics increasingly seen as divisive by consumers over the last three years.

Still, strong results for online ad peers including Facebook, Snap Inc and Amazon.com Inc have left investors flummoxed.

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