Digital Ad Spending Soars, Massive Buyback Announced
Alphabet absolutely smashed analysts’ profit expectations for Q1 after reporting earnings of $26.29 per share, against the $15.82 per share expectations. Business sales were reported at $55.31 billion, again higher than the consensus of $51.70 billion in quarterly business revenue. The Q1 business revenue figure marks a 34% increase year-over-year (YOY) for the parent company of Google.
In other closely-watched business metrics, Alphabet reported Google Cloud business sales of $4.05 billion, slightly lower than the $4.07 billion expected from the market analysts. Its video platform YouTube recorded $6.01 billion in business revenue, which is again higher than the $5.7 billion expected from the market analysts.
“Over the last year, people have turned to Google Search and many online services to stay informed, connected and entertained. We’ve continued our focus on delivering trusted services to help people around the world. Our Cloud services are helping businesses, big and small, accelerate their digital transformations,” Sundar Pichai, CEO of Google and Alphabet, said.
A surge in sales was mainly driven by an exceptional performance in the advertising business as Google reported $44.68 billion in sales for this unit, which is significantly higher than the $33.76 billion reported a year ago. Overall, the Q1 sales market the fastest annualized growth rate in at least four years for Alphabet.
“Total revenues of $55.3 billion 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 $4.0 billion in the quarter reflecting strength and opportunity in both GCP and Workspace,” Ruth Porat, CFO of Google and Alphabet, said.
A surge in YouTube revenue — a 49% jump from a year ago — doesn’t come as a surprise after a recent report, published by the Pew Research Center, noted a jump in YouTube usage from 73% of US adults in 2019 to 81% in 2021.
YouTube revenues were also boosted by Shorts features, the company's short-form answer to TikTok, which is now attracting 6.5 billion daily views, to mark a significant increase from 3.5 billion reported for the prior quarter.
Arguably the most interesting part of the Q1 earnings report is that Alphabet reported a $4.84 billion gain in the value of its startup investments. While the company didn’t specify its startup investments, it is likely that the valuations of UiPath, Stripe, and Oscar Health all heavily contributed to the rise of Google’s startup portfolio.
Shares of Alphabet have gained over 5% on strong Q1 report, as well as the announced $50 billion stock buyback program.
A jump in its startup portfolio, higher ad spending, and higher YouTube usage have all contributed to a surge in profits and revenue reported from Google’s parent company, Alphabet, for Q1. Shares of the company have also been boosted by the approval of the $50 billion stock buyback program.
About the Author
Mariliana has an MSC in Consumer Analytics and Business Strategy. She has a special interest in fast-moving industries and Big Data.