Alphabet reports $33.7bn in revenue as sexual misconduct claims engulf Google

On the day Google was engulfed by concerns about its handling of sexual misconduct allegations, Alphabet, it’s parent company, announced third quarter earnings of $33.7bn.

The results fulfilled predictions for continued growth despite controversy over a recent data breach on the company’s social network, Google+.

Ruth Porat, the Chief Financial Officer said the revenue growth was up 21% from the same period last year and reported profit of $8.3bn, with good performances from Youtube, Cloud, and both desktop and mobile search.

The results came as the New York Times reported that Google gave former executive Andy Rubin a severance package of $90m, but concealed details of a sexual misconduct allegation that triggered his departure.

The company’s CEO, Sundar Pichai, sent a letter to staff on Thursday after the New York Times article was published, insisting that the company took a “hard line” in sexual misconduct allegations, revealing that 48 people including 13 senior managers had been fired in the past two years.

However, the issue was not mentioned in the earnings call . Critics have called for an increase in government oversight and regulations over tech companies, and for a crackdown on the monopolies they hold.

“It is exciting to think that 20 years in we are still at the beginning of what’s possible,” Pichai said during the call, outlining the areas that helped the company have a strong quarter.

He detailed the ways Google hardware devices, continued development core products like search and map, and the Cloud, helped the company continue to grow. He also said they were seeing positive traction on subscription services, and were prioritizing Google News to ensure “credible news sources” are prominently surfaced.

More than 70% of Alphabet’s revenues come from Google Properties, and analysts had predicted the tech giant was heading into the third quarter on a positive note, even after controversy over a data breach spurred the shutdown of Google’s already-underperforming social network, Google+.

Earlier this month Google was ranked in the top two most valuable brands by Interbrand, a global brand consultancy that releases an annual report, based on its relevance, responsiveness, and presence. Google was valued in the report at $155bn , and has been in the top three for the past six years, showing considerable continued growth.

But in early October, the Wall Street Journal exposed that third-party developers were able to access information from roughly 500,000 accounts, and that Google executives had known about the bug in its API (application program interface) since early spring.

In a blog post published in response to the story, the company said that the developers were not aware of the bug and that they found no evidence that profile data was misused, but announced it would still shut down Google+ while it worked on strengthening data protections.

“Given these challenges and the very low usage of the consumer version of Google+, we decided to sunset the consumer version of Google+,” Google’s Ben Smith wrote, adding that the consumer side of the social platform would be phased out slowly over the next ten months.

Scott Galloway, a professor at NYU’s Stern School of Business, said it should come as no surprise that the move didn’t turn into a financial setback this quarter, especially considering how poorly Google+ was performing.

“They were looking for an excuse to shut it down,” he says. “To connect this problem to shutting the platform down was disingenuous.”

Galloway emphasized that, even if the data breach fueled controversy and concerns from consumers, it did nothing to affect the financial outlook. “These scandals have created a lot of headlines, but they haven’t impacted business performance,” he said, explaining that government intervention is the only thing that could slow Alphabet down.

“The risk to shareholders is that the specter of regulation, which at some point becomes increasingly realistic given how often these companies are blowing up on themselves,” he added.

“Monopolistic internet platforms like Google and Facebook are probably ‘too big to secure’ and are certainly ‘too big to trust’ blindly,” Jeff Hauser, from the Centre for Economic Policy Research told The Guardian after the data breach was revealed earlier this month, adding that the US Federal Trade Commission should break the platforms up.

In a move analysts called an attempt to advocate for regulations on their own terms, Pichai joined Apple’s chairman, Tim Cook, to voice support for increased oversight from the government on protecting privacy, at an international conference in Brussels this month.

Pichai insisted on Thursday that Google had “always approached our products with a strong privacy lens for our users”.

States across the US are already making moves to pass regulatory laws, following sweeping legislation in the European Union. In June, California passed its own a digital privacy law, spurring tech company lobbyists to begin advocating the federal government to draft more favorable rules.

Still, Alphabet has shown it is strong enough to withstand big regulatory hits. During the last quarter, which closed in June, Alphabet reported that its profits dipped after an unprecedented $5bn fine from the European Union. The company still defied expectations, with revenue at $32.6bn in revenue and profit of $2.8bn. The upward trend is likely to continue experts say, unless even bigger moves are made by the regulatory agencies.

“From an investor’s standpoint, you are stupid not to own these stocks,” Galloway said. “This company has incredible earnings power – because it is awesome to be a monopoly in a growing economy. The only thing standing between Google and continued growth is the government.”