Google parent: Big Q2 surge
Alphabet turns in a 21% leap in sales, 26% jump in profit as growth in mobile ads leads way
MOUNTAIN VIEW — Google parent company Alphabet on Thursday beat Wall Street expectations on several fronts, chalking up $21.5 billion in second-quarter revenue, a 21 percent increase over the same period last year.
Analysts had predicted revenue of $20.8 billion for the second quarter of 2016.
“All the trajectories look good,” said Forrester Research analyst Frank Gillett. “They’re shifting more to mobile — they’re following the customers.”
Profit for the quarter rose 26 percent year over year to hit
$4.88 billion, topping analysts’ $4.5 billion forecast. Earnings per share also exceeded expectations, at $8.42, compared with analysts’ forecast of $8.03.
Alphabet Chief Financial Officer Ruth Porat attributed revenue growth to digital advertising delivered via smartphones.
“The primary driver was the increase of mobile search by consumers benefiting from our ongoing efforts to enhance the mobile search experience,” Porat said in a conference call. “We also benefited from solid growth in desktop and tablet search, as well as continued strength in YouTube and programmatic advertising.”
Revenue was also up compared with the first quarter of this year, by 6 percent.
The usefulness on mobile devices of Google apps such as Maps, Gmail and Search underlies Alphabet’s rising income, said R.W. Baird analyst Colin Sebastian.
“The fact that revenue growth accelerated quarter over quarter was a nice surprise,” Sebastian said. “Those utility functions on mobile offered by Google apps are very important, maybe not as sexy as the next major messaging app or social platform, but I think that’s what’s driving it. A lot of the Google apps tend to be very visible and are some of the most used apps on most smartphones.”
Alphabet’s quarterly report also revealed the firm has added more than 9,000 workers over the past year, bringing the workforce up to 66,575. The company hired 2,460 workers in the quarter.
Google itself took in $21.3 billion in revenue, up 21 percent year over year. The search giant also reported a 33 percent increase in nonadvertising revenue, to $2.2 billion. Google apps and cloud services targeted at businesses have the highest potential to bring in cash to rival that from the firm’s digital advertising income, Gillett said.
However, the company’s “Other Bets,” which encompass everything that’s not Google, such as smarthome company Nest and the Google X “moonshot” experiments lab, recorded an $859 million loss, with $185 million in revenue. In the second quarter of 2015, the Other Bets lost $660 million, with revenue of $74 million.
Alphabet cut capital expenses 16 percent to $2.1 billion for the quarter. Porat, hired as chief financial officer in March 2015, has imposed “a more disciplined approach to spending,” Sebastian said.
Alphabet did not provide numbers for the performance of YouTube, but both Porat and Google CEO Sundar Pichai described it as strong. Asked whether Google was capturing revenue with YouTube that would otherwise have gone to TV providers, Pichai said it was hard to tell, but that the streaming service fit well with the company’s focus on delivering content and services through smartphones. “Video is the killer format on mobile,” Pichai said.
Alphabet’s quarterly performance sent its stock price up more than 4 percent Thursday in afterhours trading, to $797 from a close at $765.84.