Google revenue beats estimates
Ad sales surge nearly 32% in first quarter
Google parent Alphabet Inc on Tuesday beat quarterly revenue estimates and announced a US$50 billion share buyback as the recovering economy and surging use of online services combined to accelerate its advertising and cloud businesses.
The results are the first sign that Google services may hold on to gains in usage brought on by lockdowns and other pandemic restrictions that forced people to shop and communicate online over the last year.
The results “reflect elevated consumer activity online and broad based growth in advertiser revenue,” Alphabet Chief Financial Officer Ruth Porat said in a statement.
Google ad sales surged 32 per cent in the first quarter compared with a year ago, above expectations of analysts tracked by Refinitiv. Cloud sales increased 45.7 per cent, in line with estimates.
About 17 per cent of people in the United States, Alphabet’s top region by revenue, were fully vaccinated against COVID-19 by the end of the first quarter. Activities including in-person dining resumed in big cities in March, and security screenings at U.S. airports had their busiest day in a year.
The changes coincided with Alphabet’s overall sales rising 34 per cent to US$55.3 billion, above analysts’ estimate of US$51.7 billion, or 26 per cent growth over last year’s first quarter, when ad sales fell significantly in the final couple of weeks.
Alphabet’s quarterly profit rose 162 per cent to US$17.9 billion, or US$26.29 per share, beating estimates of US$15.88 per share. Earnings benefited from unrealized gains from venture capital investments and slower depreciation of some data centre equipment.
The company’s operating margin rose to 30 per cent for the first time since incorporating as Alphabet in 2015 even as its costs began to pick up again. Alphabet in 2020 suffered its slowest sales growth in 11 years but posted record profit and upped its cash hoard by US$17 billion after slowing hiring and construction.
The share repurchase authorization by Alphabet’s board follows a US$25 million buyback program announced in 2019. Jefferies analyst Brent Thill estimated Alphabet now has US$56 billion left to spend buying its shares.
It was not immediately clear which industries powered Google’s growth in ad and cloud sales.
Increased ad buying by travel and entertainment companies would be a positive sign as hotel booking services and movie studios are among Google’s biggest spenders.
Google’s ad business, the global market leader as measured in sales, accounted for 81 per cent of the quarterly revenue compared with 82 per cent a year ago.