Alphabet posts record profits for second straight quarter despite pandemic


Google parent Alphabet Inc. posted record profits for a second straight quarter during the pandemic, sending shares surging 8% to a 52-week high in after-hours trading Tuesday.

The search-engine behemoth
GOOGL,
+1.38%

GOOG,
+1.38%

reported net income of $15.23 billion, or $22.30 a share, compared with net income of $10.67 billion, or $15.35 a share, in the year-ago quarter. The company reported $11.25 billion in net income last quarter.

Revenue after removing traffic-acquisition costs improved to $46.43 billion from $46.08 billion in the year-ago period.

Analysts surveyed by FactSet had estimated net income of $10.92 billion, or $15.77 a share, on ex-TAC revenue of $43.85 billion.

“Our strong results this quarter reflect the helpfulness of our
products and services to people and businesses, as well as the accelerating transition to online services and the cloud,” Alphabet Chief Executive Sundar Pichai said in a statement announcing the results Tuesday. In a change to more clearly define its businesses, Alphabet divided its earnings statement into three operating segments: Google Services (advertising, YouTube, hardware, apps), Google Cloud and Other Bets.

Search, as usual, led the way with $31.9 billion in sales, up 17% from the same quarter a year ago. A big bump in YouTube ad sales during the election and holiday season — it jumped 46% year-over-year to $6.9 billion — led to $46.2 billion in total advertising revenue as corporations “unlocked” budgets and consumers ramped up online spending, Google executives said.

Google’s Cloud revenue soared 47% to $3.83 billion, though the division lags behind rivals Amazon.com Inc.
AMZN,
+1.11%

and Microsoft Corp.
MSFT,
-0.06%
.

In a conference call with analysts late Tuesday, Alphabet Chief Financial Officer Ruth Porat said investment will accelerate in Google Cloud, including product development, tripling of its sales force and beefed up retail operations.

“We are definitely investing ahead” to serve customers globally, Pichai added during the call.

“They hit it out of the park,” Forrester analyst Collin Colburn told MarketWatch.

“Again, all three of Google’s main lines of ad business outperformed our forecast, including YouTube, which grew by almost 46% in Q4 compared a year earlier; Google Network Member revenues, which were up almost 23%; and search, which was up more than 17% despite continuing low spending from travel advertisers, traditionally one of Google Search’s most important segments,” eMarketer analyst Nicole Perrin said in assessing the blowout results.

The strength in advertising underscores a buoyant market that Facebook Inc.
FB,
+1.94%

has benefited from financially, and from which Snap Inc.
SNAP,
+3.55%

and Twitter Inc.
TWTR,
+2.54%

are expected to follow suit when they report results over the next several days.

Google’s latest strong quarter belies antitrust suits it faces from the Department of Justice and two groups of state attorneys general over its search business. At the same time, Google has said it will likely make its search engine unavailable in Australia if the government presses on plans to make tech giants pay for news content. Australian Prime Minister Scott Morrison said he was confident Microsoft Corp.’s
MSFT,
-0.06%

Bing search service would fill the void if Google follows through with its threat.

Google shares are up 33% over the past 12 months, while the broader S&P 500 index
SPX,
+1.39%

is up 16% over the past year.



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