Weak pound slows growth for Google in Q2

Tech giant exceeds expectations despite EU fine putting dent in profit margins

Weaknesses in the British pound have slowed EMEA growth for tech giant Google in Q2, with the region lagging behind its US and APAC counterparts.

Group revenues for the firm's parent company Alphabet grew by 21 per cent year over year for the three months ending 30 June to $26.01bn, or 23 per cent in constant currencies.

Operating income meanwhile fell by 30.8 per cent to $4.12bn, largely due to Google incurring a record €2.42bn fine from the European Commission for allegedly breaching antitrust rules to push its own shopping comparison service. As a consequence, operating margins fell from 28 per cent posted in the Q2 of 2016, to 16 per cent this year.

Excluding the EU fine, operating incomes from Google came in at $7.8bn, up from $6.99bn reported in the same quarter last year. Alphabet's "other bets" segment - which includes emerging technologies such as smart homes, Google's venture capital arm and self-driving car technology - dragged group operating income down after posting a $772m loss.

Speaking to analysts on an earnings call transcribed by Seeking Alpha, Alphabet's CFO Ruth Porat claimed that, while all geographical regions grew on an annual basis, EMEA's growth was slowed down by weaknesses in the British pound and the euro.

EMEA revenues hit $8.5bn, up 14 per cent annually, while the US saw 23 per cent growth to $12.3bn. APAC hit $3.7bn, up 28 per cent year over year while the America's - which include Canada and Latin America, reached $1.4bn, up 31 per cent annually.

Google also lauded its progress within its cloud business, which is lumped in with its hardware and Android app sales under "other revenues". This segment grew 42.3 per cent annually to $3.09bn.

The US giant also increased its headcount by 9,031 employees to 75,606 staff compared with the end of Q2 2016, with CEO Sundar Pichai claiming that the firm has driven up recruitment in its cloud business.

"In terms of product areas the most sizable headcount additions were once again made in cloud for both technical and sales roles consistent with the priority we place on this business," he said on the same earnings call.

"Google Cloud Platform (GCP) continues to experience impressive growth across products, sectors and geographies and increasingly with large enterprise customers in regulated sectors. To be more specific about our momentum with big customers, in Q2 the number of new deals we closed worth more than $0.5 million is three times what it was last year."

He added: "We also continue to build out our partnerships, in Q2 we announced an expansion of our partnership at SAP and a new partnership with Nutanix to integrate their products with GCP. So customers can run workloads in hybrid environments, on-prem and in the cloud."