Google CEO Sundar Pichai hailed a “phenomenal quarter”, despite feeling the effects of a huge EU fine, as the internet giant maintained recent growth.

Parent company Alphabet said Q2 segment revenue (including advertising and “other revenue”) at its core business Google hit $25.8 billion in Q2 2017, up from $21.3 billion a year ago, fuelled by its lucrative advertising business.

Breaking out the two segments, advertising made up the bulk, with $22.7 billion revenue generated from the quarter, up from $19.1 billion. The company’s other revenue division, which includes the Pixel phone and its cloud business, grew to $3 billion, up from $2.2 billion.

CFO Ruth Porat said in an earnings call most of the growth came from mobile search, with a strong contribution from YouTube.

Revenue generated by its own properties, including both YouTube and Search, accounted for $18.4 billion of Google’s total revenue, up 20 per cent.

Rising TAC
Despite the impressive numbers, Porat did warn that its ever expanding advertising business could be subject to rising costs, given the increasing shift to mobile platforms.

Traffic acquisition costs (TAC) – which represent the fees Google pays out to smartphone partners and websites on which it places ads – is on the rise.

Total TAC increased by 28 per cent in the quarter, hitting $5 billion.

Porat said that while the company expected TAC to grow, the increases “provide another lens on just how strong our mobile business is”, while adding that the company’s focus was on “growing profit dollars”.

Alphabet group
At a group level, Alphabet reported net income of $3.5 billion, which fell 28 per cent from $4.9 billion, on revenue of $26 billion, a 21 per cent increase from the quarter year prior.

The drop in net income was largely attributed to a $2.7 billion fine levied by the European Commission (EC).

The EC said in June Google had infringed on European competition law by unfairly using its search engine to promote one of its own websites.

Excluding the fine, net income would have hit $6.3 billion, said the company.

In the company’s “Other Bets” category, which includes the Waymo self driving car and home appliance maker Nest, its loss narrowed to $772 million, from $855 million. Revenue for the division was $248 million.

In an earnings call, Pichai reiterated the company’s commitment to artificial intelligence.

“Google continues to lead the shift to AI driven computing,” he said.

Pichai also talked up Google Assistant, which is now available on more than 100 million devices since launching last year, “and there is more to come”.

He added the company would continue to “scale up” its Android operating system and include more integration with apps.