Alphabet posted a stellar quarter from A to Z. Headline numbers topped the Street, with earnings per share coming in at $7.35, quite a bit better than the Street at $7.21.
Robust ad sales and expense management helped drive the twin beats, with gross revenues coming in at $18.7 billion versus the Street at $18.3 billion (and, notably, even with the impact of currency by as much as $1.6 billion, results still topped consensus). And behind that top line, according to the company, lies a portfolio with six properties that have more than 1 billion users a piece.
Paid clicks stood out with 23 percent growth year over year, offsetting at least some of the aggregate cost per click (what it charges for ads) decline of 11 percent.
And all of those relatively cheerful metrics accompany a stock buyback, where Google/Alphabet will start to throw some serious coinage at the public markets, with a buyback worth more than $5 billion, which will commence this quarter. With roughly $73 billion of cash and equivalents on the books, that sort of buyback is pretty easy to digest.
Management sounded sanguine about its segments and, in terms of disclosure, said that it would be breaking out Google beginning next quarter. And the other businesses are called … wait for it … “Other Bets.” Doubtless you’ve never heard a concrete business unit called a “bet” before. Not surprisingly, these bets will be capital expenditure drivers going forward.
[bctt tweet=”Alphabet’s management sounded sanguine about the company’s segments.”]
With some discussion of overall trends propelling the company, mobile and YouTube have helped buoy the top line, said CFO Ruth Porat, with the United States and India coming in as the two top countries for search. Interestingly, the technology known as “deep linking” that ties queries to third-party apps has now dominated 40 percent of search results and that represents 100 billion deep links. And though YouTube showed strong growth, according to the company, in its TrueView and Preferred formats, no numbers were given, though the number of advertisers said to be using programmed ads doubled.
Mobile now accounts for more than 50 percent of searches, according to the company. Investment in the mobile search business has seemingly paid off, at least as measured in actual searches (if not yet clicks), while prudent expense management has blunted the impact that, at one time, had bedeviled margins.
Turning a bit to technology, the company has managed to sell 20 million Chromecast devices in the past two years. By application, some callouts on the earnings call centered on Google for Work, which now has more than 1 million active paying users, and Google Drive for Work also has made its mark as one of the billion-plus users platforms mentioned above. Newly installed CEO Sundar Pichai underscored the continued importance of cloud on the call, stating that every business would eventually transition to the cloud.
Ad-blocking, which has been in the news as of late, surfaced during the question and answer with Wall Street sell-side analysts. Pichai seemed nonchalant about any lingering impact from the technology, stating that it is “not a new phenomeon,” with most users accepting the tradeoff between advertising in return for free content, adding that Alphabet has a key mission to make sure ads work well on mobile devices.
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