Alphabet, Google’s parent company, easily topped the Street as core advertising business rebounded from previously sluggish growth rates amid a continued shift to mobile search. YouTube and cloud offerings helped push results.
In terms of consolidated top line, revenues of $38.9 billion were up more than 19 percent year on year and were $730 million above consensus, and adjusted EPS of $14.21 were $2.75 better than the Street.
In the latest quarter, as has been seen before, the bulk of revenues, at roughly 84 percent, were driven by the advertising business, where growth rebounded to almost 20 percent year on year to $32.6 billion — and where growth in the first quarter had moderated sharply from rates that had been north of 20 percent and had been a bit more than 15 percent in the most recently reported quarter.
The ad segment topped expectations that the company would log revenues of a bit more than $32.5 billion.
Revenues from Google Properties stood at $27.3 billion, about in line with consensus. Machine learning helped drive advertising results, and has helped advertisers get real time insight via data analysis.
The company said that paid clicks were up 28 percent on Google Properties, while cost per clicks was down 11 percent.
Other segments showed traction in “other” revenues, which includes hardware such as Pixel phones. CEO Sundar Pichai said that sales of the Pixel offerings were up “more than two times” year on year. The division also houses Google Home speakers and cloud computing operations. That segment delivered $6.1 billion to the top line, up 40 percent year on year.
In reference to the cloud, Pichai said that Google Cloud is operating at a revenue run rate of about $8 billion, and plans are in place to invest heavily in the business — so much so that the company will triple headcount here through the next couple of years.
Continuing a trend seen in past quarters, the “other bets” category of offerings continues to be a money loser, despite showing $163 million in sales, up 11.7 percent. The division, which is home to Waymo self-driving initiatives and X-lab, lost about $981 million.
In remarks to analysts on the call, CEO Pichai said the transformation underway and ahead of Alphabet and its divisions is from a company that helps people get information to a company that helps people get things done. The company redesigned its mobile search offerings and has been integrating augmented reality into its search functionality, too, he said. By way of example, users searching for shoes online can view them in 3-D or view them as part of a wardrobe.
Network revenues, including programmatic display, were nine percent year on year to $5.3 billion, up nine percent year on year with growth buoyed by Google Ad Manager and AdMob.
Data analytics continued to push growth in the cloud segment, said CFO Ruth Porat, while Pichai said that YouTube has gained momentum. He told analysts that channels with more than one million subscribers grew by 75 percent year over year: “Thousands of channels have doubled their total monthly revenues by using new monetization products” and through channel memberships.
YouTube, said Porat, was the second-highest driver of revenue growth in the quarter, and in a nod to content oversight, said that the removal of content in violation of policies had “virtually” no impact on results. Likewise, GDPR has had no impact to date, said management.
Asked on the call about the regulatory climate, Pichai said that interaction with the Department of Justice would be conducted “constructively,” and where such interaction is “not new to us. We have participated in such processes before.” The company will also ad privacy controls in the upcoming Android release that will have dozens of features around security and added privacy.