Google ad boom lifts profits to record
Google’s parent Alphabet reported record results on Tuesday as the pandemic kept people at home, watching YouTube videos and clicking on web advertisements served up by the company.
It also announced a $50bn share buyback programme, helping send its shares up 4.5 per cent in after-hours trading. That gave the tech giant a market capitalisation above $1.6tn for the first time. Only Apple, Microsoft and Amazon are larger.
Gross revenue in the first three months of this year rose to $55.3bn, Alphabet said, up 34 per cent from $41.2bn and easily outstripping expectations of $51.6bn. Net profit rose 162 per cent to $17.9bn, versus a consensus of analysts’ forecasts of $10.5bn, as calculated by Visible Alpha.
“People have turned to Google Search and many online services to stay informed, connected and entertained,” said Sundar Pichai, Alphabet’s chief executive.
Chief financial officer Ruth Porat said the figures “reflect elevated consumer activity online and broad-based growth in advertiser revenue”.
Revenue in Google’s core search business soared 30 per cent to $31.9bn. The group said retail ads led the way thanks in part to “available near me” and “kerbside pick-up” searches, with groups such as Dick’s Sporting Goods doubling its ecommerce business amid the pandemic.
YouTube revenues grew 49 per cent to $6bn, and chief business officer Philipp Schindler told investors Google was “still scratching the surface on what’s possible” to turn the video channel into a platform for big brand advertising.
“Historical approaches to reaching audiences through (traditional television) don’t really work any more,” he said. “Advertisers are using YouTube now to reach the audience they can’t find anywhere else.”
After the blowout quarter, Alphabet was sitting on $135bn of cash. Its new $50bn buyback scheme is double the size of its last authorisation in 2019.
By region, Alphabet’s revenues soared 44 per cent in Asia, 33 per cent in the US, and 25 per cent in Europe, the Middle East and Africa in the first quarter.
Revenue from Google’s non-search business, including its Android app marketplace and hardware such as Pixel phones and smart speakers, increased 46 per cent to $6.5bn.
The company’s Google Cloud unit — a distant third-place cloud services provider after Amazon and Microsoft — added $4bn of revenue, up 45.6 per cent. Although the unit continues to be lossmaking, the losses narrowed to $974m from $1.73bn a year ago.
Overall results indicate Porat is keeping a close tab on operating costs and expenses, which rose only 17 per cent to $38.9bn, $1bn less than analysts had projected. Sales, marketing and administration costs were all flat, helping to flatten operating margins from 19 per cent a year ago to 30 per cent.
Likewise, “Other Bets”, where Alphabet houses groups including its driverless car business Waymo, life sciences researcher Verily and its “moonshot factory” X, spent $1.14bn, just 2 per cent more than a year ago. Meanwhile, revenues from these emerging businesses jumped 47 per cent to $198m.
Pichai said Alphabet planned to invest more than $7bn in offices and data centres in the US this year, creating “at least 10,000 new full-time jobs”.