TOPLINE Google parent Alphabet posted first quarter earnings Tuesday of $26.29 per share (versus Wall Street expectations of $15.82 per share) on revenues of $55.31 billion (versus expectations of $51.7 billion), boosted by surge in ad revenues.
KEY FACTS
- Alphabet’s reported fiscal first quarter net income of $17.93 billion, or $26.29 a share, almost tripled the net income of $6.84 billion, or $9.87 a share, in the year-ago period.
- The first quarter revenues of $55.2 billion represented a 34% jump from the first quarter of 2020.
- Google’s total advertising revenues soared by 32% year-over-year to $44.6 billion.
- Revenues at Google’s Cloud unit amounted to $4.05 billion (a 46% surge over last year), but slightly below analyst estimates of $4.07 billion, according to financial date firm FactSet.
- But ads generated by the YouTube unit totaled $6.01 billion, above expectations of $5.70 billion (according to FactSet unit StreetAccount) and a 49% surge over the prior year,
- Traffic acquisition costs (which are payments made to affiliates and online companies for directing traffic to their websites) came in at $9.71 billion versus expectations of $9.25 billion, according to FactSet estimates.
CRUCIAL QUOTE
Total revenues in the first quarter “reflect elevated consumer activity online and broad-based growth in advertiser revenue. We’re very pleased with the ongoing momentum in Google Cloud, with revenues of $4 billion in the quarter reflecting strength and opportunity in both [Google Cloud Platform] and [Google Workspace computing software],” said Ruth Porat CFO of Google and Alphabet.
KEY BACKGROUND
Alphabet shares climbed about 4% in post-close trading. Google’s Cloud platform, which competes with rivals Microsoft’s Azure and Amazon’s AWS (Amazon Web Services), posted a $974 million operating loss for the quarter, but that compared to a $1.7 billion loss in the prior year. “In the FAANG [Facebook, Amazon, Apple, Netflix and Alphabet] group Amazon is the only competitor against Alphabet on more than one front and whilst Amazon has a large cloud service in AWS, Google’s ad business dwarfs its rival,” Tom Johnson, chief transformation officer at marketing agency WPP Mindshare, told Yahoo Finance. “As brands accelerate out of the pandemic, Alphabet’s combined offering… is likely to become even more attractive as more businesses move to direct-to-consumer or hybrid business models leveraging Alphabet’s advertising and cloud services.”
BIG NUMBER
32%. That’s how much Alphabet shares have surged year-to-date, well above the S&P 500’s return of 11.5%.
SURPRISING FACT
While Alphabet jumped by 30.9% in pandemic-afflicted 2020, it underperformed some of its FAANG peers: Apple soared 85%, and Amazon surged about 76%.
TANGENT
In March, Google said it would spend $7 billion to expand offices and data centers across 19 states, creating at least 10,000 full-time jobs.
FURTHER READING
Google Parent Alphabet Is No Longer A $1 Trillion Company After Latest Earnings Miss (Forbes)
By Palash Ghosh, Forbes Staff