Earnings Reports

Google Ad

Internet giant Alphabet, owner of Google reported huge beats in second quarter earnings after the close Tuesday. Google advertising, which includes search and YouTube ads, exhibited accelerating momentum again as did cloud and YouTube revenues sending $GOOGL higher.

Alphabet Google Tiles

Alphabet Reported Second Quarter Earnings After The Close Tuesday

$27.26 Beat $19.30 EPS Forecast and $61.88B Beat $56.19.96 Billion Forecast

Conference call: 4:30 p.m.

Updated After Earnings 7/27/21

Earnings

  • Q2 EPS $27.26 ($19.30)
  • Q2 Revenue $61.88B (est $56.23B)
  • Net income was $18.5 billion, or $27.26 per share, compared to $6.9 billion, or $10.13 per share, in the same period a year ago.
  • Total revenues increased 62% year-over-year to $61.9 billion.
  • Revenues rose 57% on a constant currency basis.
  • Google's ad services brought in $57.1 billion,
  • Cloud revenue grew to $4.6 billion.)

Google advertising revenue trend 2Q21

The global shift to online video and streaming continues

," Google chief business officer Philipp Schindler told investors on Tuesday's earnings call, adding that with 2 billion monthly users and 2 billion hours of video being watched on its services every day, Google is "at the forefront of this shift." Schindler said YouTube TV is Google's "fastest-growing consumer service" and now has 120 million monthly viewers in the US alone, up from 100 million a year ago.

Alphabet Inc Class A NASDAQ: $GOOGL

Market Reaction 2,724.00▲ 86.00 (3.26%) After Hours

Highlights

YouTube’s reported advertising revenue of $7 billion is up 84% year over year. In a separate note, YouTube disclosed that its YouTube Shorts product has “surpassed 15 billion global daily views,” up 131% from the 6.5 billion global daily views that it detailed in March. (

Google Cloud reported revenue of $4.6 billion, up 54% year over year. That growth rate is slightly above what Microsoft posted for its Azure cloud unit. Google Cloud cut its operating loss from $1.4 billion in the year-ago Q2 to a far more modest $591 million deficit in its most recent quarter.

On the Other Bets side of things, revenues rose, But so did losses. The skunkworks group at Alphabet posted $192 million in revenue, up from $148 million in the year-ago period. However it still $1.4 billion in the quarter, up from $1.1 billion in the corresponding year-ago period. Naturally with operating income of $19.4 billion inclusive of its Other Bets cost center, Alphabet can well afford to continue spending on what projects that may in time generate material future revenues. Basically everything at Alphabet that is not Google’s core offerings (search, YouTube, etc.) lost money in the quarter:

GOOGL Earnings Q2 2021

Legal Problems

Google's earnings also come as the company faces multiple antitrust lawsuits and likely a tougher regulatory environment under Biden appointees like Federal Trade Commission chair Lina Khan, as well as criticism from employees over its sexual-misconduct policies and dismantling of its AI ethics team following the departure of Timnit Gebru.

Earnings Preview

Alphabet Inc. (GOOGL) report second-quarter 2021 earnings Tuesday after the closing bell with projected earnings of EPS: $19.20 and projected revenue: $56.19 billion.

The majority of Alphabet revenue is from Google’s advertising products (85% last quarter), but analysts predict Google’s “Other” segment, including its cloud computing division, hardware sales and Play Store will generate larger sales. Other bets, the segment Google reserves for its more experimental units, is also expected to report higher sales.

Advertising

Last quarter Google parent Alphabet (GOOG) crushed EPS and revenue estimates even though the company faced sky-high expectations heading into its Q1 report. Advertising spending recovered in a more forceful and rapid way than had been anticipated with an upswing in spending in categories that were hammered by the pandemic such as travel and leisure, dining, and shopping at brick-and-mortar stores. GOOG's search and advertising businesses are perfectly aligned to capitalize on these developments, given that many companies within those recovering spaces use GOOG for marketing purposes.

Q1 total revenue surged by 34% yr/yr, marking its strongest growth rate in over five years. GOOG's cloud segment continues to produce strong double-digit growth. Google advertising, which includes search and YouTube ads, exhibited accelerating momentum, with revenue up 32% to $44.7 bln (~81% of total revenue) compared to 22% growth in Q4.

During the earnings conference call, CFO Ruth Porat acknowledged that the increase was partly due to the lapping of the initial impact of the pandemic that hit in March. However, she also stated that GOOG experienced broad-based increases in advertising spending, with the retail and tech categories standing out.

Travel is another key industry for GOOG that is showing significant improvement. Earlier in this earnings season, major carriers like Delta Air Lines (DAL), Southwest Air (LUV), and United Airlines (UAL) reported that demand for leisure travel has returned in a meaningful way.

GOOG's Chief Business Officer, Philipp Schindler, echoed that sentiment, stating that the company is seeing renewed interest for travel as users turn to GOOG to plan their next trip before they're ready to book. In turn, airlines, hotels, travel booking companies, entertainment venues, and other travel-related companies are ramping up advertising spending to capitalize on consumers' increasing search activity. 

YouTube

YouTube continues to shine as momentum builds in direct response advertising. Following Q4's 47% jump, YouTube advertising revenue soared by 50% yr/yr to $6.0 bln in Q1. During the pandemic, YouTube benefited from stay-at-home mandates because people increasingly used the site for entertainment purposes and to find useful information regarding COVID-19. 

Cloud

GOOG's cloud segment has churned out steady and healthy revenue growth. In fact, the 45% top-line growth generated in Q1 essentially matched last quarter's 46% figure. According to CEO Sundar Pichai, a few different trends are driving growth in the could segment, including strong customer momentum in the data cloud, the desire from customers to create operational efficiencies and to reduce IT costs, and the rise of hybrid cloud environments. These catalysts are expected to continue into the foreseeable future, prompting GOOG to ramp up its investments in its cloud offerings.

Consequently, this segment generated an operating loss of nearly $1 bln, with more losses likely in the coming quarters. Over time, though, the company believes that the cloud segment will benefit from increased scale.

Stock Buybacks

GOOG also authorized the repurchase of up to an additional $50 bln of its Class C capital stock in Q1.

 

Alphabet Inc Class A NASDAQ: $GOOGL

Market Reaction to Q1 2,359.04 ▲ 68.06 (2.97%) close · April 28, 2021

Source: Google, TradersCommunity

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