Google Parent Alphabet Beats Q1 Revenue Expectations Despite Coronavirus Downturn

Author image

Sergei Klebnikov   Forbes U.S. Staff

Google

Photo: Mitchell Luo on Unsplash

Shares of Google parent, Alphabet, rose by more than 4% after the company reported first quarter earnings that beat revenue expectations, despite headwinds from the global spread of the coronavirus.

KEY FACTS

- Alphabet disclosed first quarter revenue of $41.2 billion, beating Wall Street expectations $40.3 billion. The company’s revenue growth rate fell to 13%, down from 17% in the previous quarter. 

- Advertising sales still make up most of Alphabet’s total revenue (82%) and rose to $33.8 billion, up from $30.6 billion last year. Traffic acquisition costs came in at $7.45 billion, versus $7.51 expected.

- Alphabet reported $9.87 in earnings per share, which was lower than the $10.33 expected, according to Refinitiv.

- Google’s “other revenue” segment saw a nice bump in the first quarter, coming in at $4.4 billion compared to $3.6 billion a year ago, with cloud revenue making up $2.8 billion of that number.

- YouTube, which has proved over the years to be an enormously profitable acquisition for Alphabet, also continued to show growth, with $4 billion in quarterly advertising revenue.

- “Performance was strong during the first two months of the quarter, but then in March we experienced a significant slowdown in ad revenues,” according to Alphabet’s chief financial officer, Ruth Porat, said in a statement. 

- She said that the company plans to “sharpen its focus on executing more efficiently” as it faces a second-quarter of what is likely to be a further slowdown in ad revenue.

CRUCIAL QUOTE

“Google reported a significant deceleration in search ad revenue growth to single digits, which suggests a serious hit to the growth of their search business due to COVID starting in mid-March or later, but not as severe as it could have been,” according to eMarket principal analyst Nicole Perrin. “The deceleration to Google's display ad businesses, including Google Display Network and YouTube, was lower, and again fell in line with our relatively optimistic scenarios for digital advertising in Q1.” She suggests a “cautiously optimistic outlook” for Alphabet’s earnings in the second quarter.

KEY BACKGROUND

Ahead of the company’s first quarter earnings report, Alphabet stock fell 3% as investors worried about the extent to which advertisers began to pull back toward the end of the first quarter, in the midst of the coronavirus pandemic. Analysts expect a further hit to ad sales during Alphabet’s second quarter.

 

FURTHER READING

Stocks Fall As Oil Futures Turn Negative And Lawmakers Fail To Agree On More Stimulus Loan Funding

Netflix’s Stock Is Now Higher Than Before Coronavirus Hit U.S.

Author image

Sergei Klebnikov   Forbes U.S. Staff

I am a New York—based reporter for Forbes covering breaking news, with a focus on financial topics. Previously, I wrote about investing for Money Magazine and was an intern at Forbes in 2015 and 2016. I graduated from the University of St Andrews in 2018, majoring in International Relations and Modern History.