While issuing a caution about the possibility of a slowdown in the growth in usage and ad sales during the pandemic with roll out of vaccines and with people resuming in-person activities, Google parent Alphabet Inc reported record profits for the second straight quarter as well as a share buyback program worth $50 billion.
Analysts’ revenue estimates were easily beaten by Alphabet with online consumer activity remaining high in the first quarter and its sale revenues almost surpassed the quarterly record it had set in the last quarter of last year.
In the first quarter, there was a 32 per cent year on year jump in Google ad sales which was well above the expectations of analysts tracked by Refinitiv. There was also a 45.7 per cent growth in its cloud computing sales which was in line with estimates.
According to analysts, the performance for the first quarter were indications that some of the gains made during the height of the Covid-19 pandemic and the lockdowns by Google services such as search and YouTube could be held on to by the company. During the last one year, the pandemic forced people to stay indoors forcing consumers to shop and communicate online.
By the end of the first quarter, about 17 per cent of people in the United States, the top region by revenue for Alphabet, had been fully vaccinated against Covid-19. There was resumption of in-person activities including in-person dining in March in the big cities and security screenings at US airports had their busiest day in a year.
“But it’s too early to forecast the extent to which these changes in consumer behavior and advertising spend will endure,” said Alphabet Chief Financial Officer Ruth Porat to analysts.
On the question on whether there had been an increase in spending by travel and other industries that comprised the major clients of Google prior to the pandemic, nothing was said by Google Chief Business Officer Philipp Schindler and Porat.
On the overall, there was a 34 per cent growth in Alphabet’s quarterly sales to $55.3 billion which was well over the estimates of analysts of a 26 per cent growth for the quarter compared to the same quarter a year ago and was expected to be close to the $56.9 billion as was reported by the company for the fourth quarter. There was also addition to the company’s revenues from by the acquisition of smartwatch maker Fitbit by Google in January. But the amount of benefit was not disclosed.
81 per cent of the total first quarter revenues for Alphabet was accounted for Google’s ad business which is the highest in the world in terms of sales.
Among the big advertisers in the search engine of the company for the first quarter were retail, technology and consumer product companies, Schindler said.
On the other hand, the operating loss for the quarter for the company’s Google Cloud business which is distant rival to the cloud businesses of Amazon.com Inc and Microsoft Corp, also narrowed to 44 per cent and came in at $974 million. However the company noted that one-time factors, including the depreciation, were responsible for the performance and hence one should not be too elated by the figure.
(Adapted from Wion.com)